Solmar Insights
Public Service Enterprise Group’s (PSEG) unregulated power generation unit is entering the PJM Interconnection’s bilateral contracting process, advancing several proposals to supply data centers in New Jersey and other PJM zones. The move aligns with PJM’s evolving approach to securing reliability for large loads through both an upcoming capacity auction and a rolling bilateral matching process. PSEG reported $334 million in second-quarter 2026 income, as it continues conversations with regional data center developers and large-load customers about long-term power purchase options, including leveraging its existing nuclear fleet.
Key figures
$334M Q2 2026 income for PSEG
3,760 MW owned nuclear generation in NJ and PA
1.3 GW load forecast reduction in ComEd zone for 2031
$40M potential annual loss if PSE&G loses PJM return adder
PJM’s bilateral contracting initiative
PJM Interconnection has developed a new two-part process to address the growing demands of large loads, especially in the data center sector. The strategy features a scheduled one-time capacity auction, set to begin on September 30, 2026, paired with a bilateral matching process that has already commenced. This process aims to align power suppliers with large, planned electric loads, such as hyperscale data centers, resulting in long-term bilateral contracts. Initial deals may be announced as early as August 2026, but PJM expects the matching and contracting activities to extend well into the spring of 2027.
The bilateral process represents a shift from PJM’s traditional market-based resource adequacy planning toward a more direct and proactive method for resource procurement tailored to specific large loads. In practice, this can result in more predictable procurement of generation capacity and enhanced power reliability for segments facing exponential growth in consumption.
PJM’s new approach is in part a reaction to the unprecedented pace of data center and digital infrastructure expansion, especially in corridors stretching from Northern Virginia to Northern Illinois. This expansion has placed strain on transmission planning and long-term reliability forecasts, making bespoke bilateral agreements an increasingly attractive tool for both load-serving entities and new or expanding large customers.
PSEG’s entry into this process positions it at the forefront of a critical regional transition, as both investor-owned and unregulated power arms look to restructure commercial arrangements for grid-facing digital infrastructure customers.
PSEG Power’s proposals and market focus
PSEG Power, which holds the company’s competitive generation portfolio, has advanced several supply proposals targeting data centers in New Jersey and other points in the PJM region. Company chair, president and CEO Ralph LaRossa noted that these efforts take advantage of PJM’s evolving reliability backstop initiatives, looking to secure long-term agreements that resemble traditional regulated utility contracts or structured power purchase agreements tailored to data center consumption patterns.
LaRossa emphasized the strategic opportunity for PSEG in the context of PJM’s process, specifically where large digital infrastructure projects are seeking firm, multi-year supply, often with green attributes or dedicated nuclear output. PSEG’s market edge lies in its substantial nuclear generation asset base, which accounted for some 3,760 MW at the start of 2026 spread across sites in New Jersey and Pennsylvania. These nuclear assets are especially attractive to data center operators, who face mounting emissions and reliability requirements from their hyperscale customers.
PSEG’s proposals, while not publicly detailed, speak to the market’s demand for innovative commercial models amid regulatory and reliability uncertainty. LaRossa declined to elaborate on specific contract terms or off-take volumes, citing ongoing negotiations and the shifting load forecast landscape within PJM. Negotiations with potential data center off-takers remain active as the process unfolds.
This activity reflects an ongoing trend of traditional generation owners entering direct negotiations with data center operators, with the potential to set new precedents for the region’s power supply model.
PJM load forecasts and transmission implications
As PJM advances its bilateral matching process, load forecasts are becoming a critical variable for both network planning and commercial contracting. On August 4, 2026, PJM revised its long-term peak demand expectations for the Commonwealth Edison (ComEd) zone in northern Illinois, citing a reduced pipeline of planned data center projects. Specifically, PJM lowered its ComEd load estimates by 1.3 GW in 2031 and 3.3 GW in 2034, a significant adjustment that will influence both the need for new transmission assets and the scale of generation procurement required to meet future demand.
Such adjustments signal the challenges of accurately projecting digital infrastructure growth, a sector where project timelines are increasingly volatile and subject to global market forces, policy signals, and capital flows. For transmission developers and grid planners, sudden reductions in projected large loads can delay or reshape investment decisions regarding new lines, substations, and generator interconnections.
For PSEG and its competitors, these changes heighten the importance of having commercially flexible generation portfolios and the ability to negotiate bilateral contracts that reflect shifting demand. Within this context, data center operators seeking reliable, long-term supply may encounter fluctuating prices and connection timelines, as market dynamics and planning horizons adjust to the updated forecasts.
Meanwhile, PJM’s evolving approach reflects a balancing act between ensuring regional grid reliability and offering market certainty to major load growth industries.
Nuclear generation as a value proposition
PSEG Power’s active discussions with prospective data center customers leverage its existing and future nuclear generation capacity as a cornerstone of its offering. The company owns about 3,760 MW in nuclear facilities across New Jersey and Pennsylvania, providing a potentially carbon-free, firm supply well-matched to the profiles of hyperscale and colocation data centers.
Nuclear generation is experiencing renewed interest among digital infrastructure buyers who prioritize resilience and emissions compliance. PSEG’s ability to commit portions of its nuclear fleet to bilateral supply deals may offer data center customers an alternative to fossil-heavy grid mixes, as well as the long-term price certainty that comes from multi-year or utility-like contract structures. The ongoing negotiations also suggest that PSEG is considering future nuclear upgrades, which could further enhance its supply capabilities and reinforce its strategic role as a premium clean power supplier in the PJM footprint.
This positioning may support broader moves in the market toward aligning digital infrastructure growth with decarbonization targets, as policy momentum and supply chain imperatives shape how generation resources are allocated and secured.
For PSEG, a portfolio anchored by nuclear generation provides a flexible foundation for addressing both regulatory pressure and hyperscale customer requirements as bilateral contracts become more prevalent in the sector.
Financial impacts and regulatory context
PSEG reported a second-quarter 2026 income of $334 million, reflecting a year-over-year decrease from $585 million, mainly attributed to changes in mark-to-market accounting positions. For PSEG subsidiary Public Service Electric and Gas (PSE&G), electricity sales climbed by 1% on a weather-normalized basis over the preceding twelve months in New Jersey, highlighting modest but consistent growth within regulated lines of business.
Another notable metric is the estimated $40 million in potential annual income that PSE&G could lose if it forfeits its 0.5% return on equity adder for being a PJM member. This underscores the intertwined stakes of regional grid participation, regulatory compliance, and the economics of interconnection for both transmission owners and power suppliers within PJM.
Importantly, these financials are set against a broader context of potential changes to the New Jersey utility business model, a development that CEO LaRossa described as “encouraging” during the company’s recent earnings call. The evolving regulatory environment may spur more flexible and competitive supply offers, especially as New Jersey continues to pursue aggressive energy transition and grid modernization goals.
For institutional market participants, understanding the evolving regulatory and earnings environment is crucial to pricing risk and opportunity in PJM’s fast-changing data center and large load landscape.
What this means for buyers
PSEG’s active participation in PJM’s bilateral contracting process could redefine how hyperscale and colocation data centers secure long-term power supply, especially for those prioritizing firm, carbon-free generation. As PJM and regional utilities adapt to the unpredictability of digital infrastructure demand, buyers should expect increased negotiation for capacity rights and possible volatility in pricing structures. The focus on nuclear-backed bilateral deals offers a pathway for compliant growth, though regulatory shifts in New Jersey and beyond may also reshape the contracting environment. Institutional buyers and developers will need to closely monitor PJM’s forecasts and PSEG’s evolving contract terms to secure favorable positions in upcoming procurement rounds.
