PJM Decision Points I, II, III: What Each Gates, What You Need to Pass, and How Site Control Tightens at Each Stage

The cycle in one paragraph

The PJM cycle process is a sequence of three engineering phases punctuated by three Decision Points. The cycle opens with an Application window, followed by an Application Review Phase in which PJM issues deficiency notices and the developer cures them within a 10-business-day window. Once accepted, the project enters Phase I — the System Impact Study (SIS) — which produces the initial allocated network upgrade cost and triggers Decision Point I (DP1). At DP1 the developer either elects to continue, withdraws, or modifies the request within the bounds of Manual 14H Section 7.2. Continuing means entering Phase II, where PJM produces firm network upgrade scope and cost. The Phase II results trigger Decision Point II (DP2). Continuing past DP2 enters Phase III — the Facilities Study — where the direct attachment facilities are engineered in detail. Phase III concludes with Decision Point III (DP3), after which the developer executes the Interconnection Agreement (IA). Each DP requires updated site control evidence, additional financial deposits, and re-affirmation of project commercial readiness. The structure is codified in PJM Tariff Part VII, Subpart C and Manual 14H.

Decision Point I in depth

Decision Point I is the first formal go/no-go gate in the cycle. It sits at the end of Phase I and gates entry into Phase II. The DP1 election window typically opens within five business days of Phase I report issuance and runs for 30 to 60 calendar days, set by Manual 14H Section 8 and the cycle-specific schedule order.

What DP1 gates

DP1 gates entry into Phase II and the substantial financial commitment that comes with it. A project that elects to continue at DP1 posts the Phase II study deposit and the readiness deposit, which is $4,000 per MW up to a $2 million cap. A project that withdraws at DP1 forfeits a portion of its Phase I study deposit but avoids the larger Phase II deposit exposure.

What's required to pass DP1

• Phase I Study results received and reviewed. The 15-section Phase I report is the primary input. See our companion guide on how to read PJM Cycle 1 Phase I System Impact Study results for a section-by-section walkthrough.
• Maintained site control over the initial Site. The developer must demonstrate that the site control evidence package submitted at Application is still valid — no expired options, no unrecorded amendments, no parcel removals that drop coverage below the Manual 14H Section 7.1 thresholds.
• Deposit decision and posting. The Phase II study deposit and the readiness deposit must be wire-transferred to PJM within the DP1 election window. Late posting is treated as withdrawal.
• Officer Certification re-affirmation. Some cycles require a refreshed Officer Certification at DP1 attesting that the site control evidence remains accurate. Cycle 1 follows this pattern.

The go/no-go choice and withdrawal economics

The DP1 economic decision turns on three factors: headline allocated network upgrade cost from the Phase I report, contingent facility exposure (upgrades allocated to higher-priority queue projects whose withdrawal would inherit cost back to your project), and affected systems schedule risk. We cover the full three-question DP1 framework in the Phase I results guide.

Withdrawal at DP1 carries a defined cost: the developer forfeits actual study costs incurred to date out of the original Phase I study deposit, with the remainder refunded. For Cycle 1 projects this is typically $50,000 to $200,000 net depending on project size, plus loss of the Application Fee. Withdrawal at DP1 does not trigger the larger penalties that attach to DP2 or DP3 — the cycle is designed to allow developers to exit cleanly when Phase I cost discovery proves unfavorable.

The Section 7.2 parcel modification window closes at DP1

The most consequential site control rule at DP1 is the closing of the Manual 14H Section 7.2.2 parcel modification window. Section 7.2.2 permits new parcels to be added to the Site at DP1 only if those parcels are (a) adjacent to the initial Site or (b) covered by a recorded easement to the initial Site. After DP1, no new parcels can be added under any theory. The project is locked to its DP1 footprint for the remainder of the cycle.

In practice this means: if your DP1 layout requires expansion beyond the parcels submitted at Application, you must complete that expansion before the DP1 election — either by demonstrating adjacency to the initial Site, or by recording an easement that connects the expansion parcels to the initial Site. After DP1 closes, the only available modifications are substitution of evidence on existing parcels under Section 7.2.3. For the full grammar of permitted modifications, see our companion piece on Manual 14H site control sections.

The Application Review Phase deficiency-cure feedback loop

Before reaching DP1, every cycle project passes through the Application Review Phase — PJM's 15-business-day window to issue deficiency notices, the developer's 10-business-day window to cure, and PJM's subsequent 15-business-day validation window. The Application Review Phase does not change the DP1 election but it does shape the site control evidence baseline that DP1 measures against. Projects that cure deficiencies in the Application Review Phase often emerge with a refined evidence package that needs only modest updates at DP1; projects that struggle through the Application Review Phase often face additional updates at DP1 to maintain consistency. See our guide on PJM Cycle 1 deficiency notice response for the five most common site control reasons projects get flagged.

Decision Point II in depth

Decision Point II sits at the end of Phase II and gates entry into Phase III — the Facilities Study. By the time a project reaches DP2 it has already cleared the DP1 cost-discovery gate and is studying its firm network upgrade scope and cost. DP2 is where the network upgrade cost shock most often materializes.

What DP2 gates

DP2 gates entry into the Facilities Study and the IA-track work that follows. A project that elects to continue at DP2 posts an additional Phase III study deposit and accepts the firm network upgrade allocation as binding for IA execution purposes. A project that withdraws at DP2 forfeits the readiness deposit posted at DP1 in addition to incurred study costs.

What's required to pass DP2

• Phase II Study results received. Phase II produces firm network upgrade scope and cost, replacing the preliminary Phase I estimate with engineered numbers. The Cost Summary at Phase II is the basis for the eventual Generator Interconnection Agreement (GIA) cost responsibility.
• Updated site control with reduced option weight. At DP2 the share of the project covered by options to lease (versus executed leases or deeds) must be smaller than at DP1. The exact ratio is set by the cycle-specific Manual 14H Section 7.1 threshold; for Cycle 1 the working expectation is that no more than 30 percent of the project's MFO-weighted footprint can be supported by options at DP2.
• Increased deposit. The Phase III study deposit is layered on top of the Phase II readiness deposit. The combined exposure at DP2 is typically in the seven to eight figures for utility-scale projects.
• Officer Certification covering the updated site control mix. A fresh attestation that reflects the post-DP1 evidence is required.

The network-upgrade-cost-shock pattern

The most common DP2 failure mode is network-upgrade-cost-shock: the firm Phase II cost is materially higher than the Phase I estimate, often by 30 to 60 percent. The drivers are usually queue-position evolution (a higher-priority project withdrew, increasing your distribution-factor allocation), refined engineering (Phase I uses preliminary models; Phase II uses detailed power flow studies), and supply-chain inflation on long-lead transformer and reactor equipment. See network upgrade costs for solar interconnection for the cost driver breakdown.

The cost-shock pattern is structural. Phase II is when the engineering becomes real, and the cost gap between Phase I preliminary numbers and Phase II firm numbers is the first place a marginal project actually fails.

How site control tightens at DP2

The Section 7.2.2 parcel modification window has already closed at DP1. At DP2 the only permitted site control modifications are substitution of evidence on the existing parcels: replacing options to lease with executed leases, replacing memoranda with recorded leases, and replacing one signature with another on multi-owner parcels. Any new evidence submitted at DP2 must be on a parcel that was already part of the DP1 footprint. The option weight allowed at DP2 is reduced from DP1 levels, which forces the developer to convert options to executed evidence between DP1 and DP2 even on parcels they have always controlled.

Option-to-lease expirations are a frequent silent killer at DP2. An option signed at Application with a 24-month term expires roughly when DP2 falls in the cycle calendar. If the option was not extended or converted to an executed lease before expiration, the project loses site control on that parcel and may fall below the Manual 14H Section 7.1 coverage threshold. See option-to-lease expiration and interconnection milestones for the timing patterns.

Decision Point III in depth

Decision Point III is the final commitment milestone before IA execution. It sits at the end of Phase III — the Facilities Study — and gates the developer's transition from study process to construction. By DP3 the project's network upgrade scope is firm, the direct attachment facilities are engineered, and the only remaining commercial gates are construction permits, financing, and offtake.

What DP3 gates

DP3 gates the execution of the Interconnection Agreement (IA), also known as the Generator Interconnection Agreement (GIA) under PJM's standard agreements suite. The IA establishes the legal terms for interconnecting the project to the PJM transmission system, including cost responsibility, milestone schedule, and operational requirements.

What's required to pass DP3

• Facilities Study completed. The Facilities Study engineers the lead line, switchyard, breakers, and POI equipment in construction-ready detail. The output includes detailed bill-of-materials, equipment specifications, and construction lead times for every piece of project-cost equipment.
• 100 percent non-option site control. Every parcel in the project's DP1 footprint must be covered by an executed lease, deed, or recorded easement — with options to lease no longer permitted. This is a hard requirement: even a single remaining option triggers a deficiency.
• Officer Certification re-affirmation against executed evidence. A fresh Officer Certification dated within the DP3 election window, attesting that the executed evidence covers 100 percent of the project footprint.
• Posted security and collateral. The IA-execution security — typically a letter of credit or cash collateral covering a portion of network upgrade cost — must be posted before IA execution. The amount is set by the executed Application and Studies Agreement and the cycle-specific schedule order.
• Demonstrated commercial readiness. Some cycles require evidence of permitting progress, offtake agreement, or financing letter of intent. The exact requirements are governed by Manual 14H Section 9 and the cycle-specific schedule order.

The IA milestone schedule that follows

Once the IA is executed, the project enters the IA-track milestone schedule. The standard PJM IA includes a Commercial Operation Date (COD) milestone, an interim milestone for permits and notice-to-proceed on long-lead equipment, and a financial security ratchet that increases as construction milestones approach. Failure to hit IA milestones can trigger network upgrade cost reallocation back to the developer or, in extreme cases, IA termination and project withdrawal under Tariff Part VII.

Site control progression by Decision Point

The single most important operational reality across DP1, DP2, and DP3 is that site control tightens at every stage. The threshold, the option-versus-executed mix, the encumbrance treatment, and the governing Manual 14H section all change. The table below summarizes the progression.

Decision Point gating matrix

The gating matrix below summarizes what each DP controls, the site control bar that must be cleared, the Tariff and Manual reference, and the withdrawal economics. This is the single reference table for operational planning.

Decision Point timing matrix

The timing matrix below captures the typical study durations and developer review windows between DPs, plus the most common slip causes. Times are typical Cycle 1 expectations and may vary by cycle.

Total cycle clock from application to IA execution: approximately 27 to 36 months when there are no restudies and no Affected Systems delays. Restudy and Affected Systems coordination commonly add 6 to 18 months on top of the base timeline.

Cycle 1 vs RRI vs TC2: how each track expresses the DP structure

The DP structure described above applies most cleanly to Cycle 1, the inaugural FERC Order 2023 cycle that opened in 2026. The other two active PJM tracks express the DP structure differently:

• Cycle 1 follows the canonical DP1/DP2/DP3 structure described here; M-14H Sections 8 and 9 are the primary references.
• RRI uses a compressed framework under Tariff Subpart C Sections 305-306. The 51 projects do not run the full Phase I/II/III sequence; milestone names map approximately to DP1 and DP3 but skip Phase II expansion. See PJM RRI site control.
• TC2 processes legacy projects under modified pre-Order 2023 procedures with TC2-specific milestone names that map roughly to the DP structure but use prior Manual 14G language in places.

Common Decision Point failures

The DP failure modes break into three categories: site-control-driven, study-driven, and commercial-driven. The right diagnostic at each DP is different.

Site-control-driven failures

• Option expiration. Options to lease signed at Application with 24-month terms expire near DP2. Without timely extension or conversion, the project loses coverage on the affected parcel.
• Parcel modification violations. Adding non-adjacent parcels at DP1 without a recorded easement violates Section 7.2.2 and produces a deficiency that may not be curable within the DP1 election window.
• Officer Certification mismatches. An Officer Certification that does not exactly match the executed evidence package — mismatched APN list, mismatched MFO, mismatched effective dates — flags a deficiency at every DP.
• Gen-tie ROW gaps. The lead-line corridor connecting the project to the POI is treated as direct attachment site control. ROW gaps along the gen-tie are 100 percent project-cost exposure and a frequent DP3 failure mode when a single hostile landowner along the corridor refuses to grant easement.

Study-driven failures

• Network upgrade cost shock at DP2. Phase II firm cost that exceeds the Phase I preliminary cost by 30+ percent can render the project uneconomic and force withdrawal at DP2.
• Affected Systems coordination failure. Required upgrades on neighboring RTOs (MISO, NYISO) that cannot be scheduled in time push the in-service date beyond the offtake delivery deadline.
• Restudy triggers. Higher-priority queue project withdrawals that change the project's distribution factor allocation can trigger a Phase II or Phase III restudy and reset the DP clock.

Commercial-driven failures

• Offtake collapse. Loss of the PPA counterparty between DP2 and DP3 leaves the project without revenue commitment and forces withdrawal even when the technical and site control gates are clean.
• Financing failure. Inability to close debt or tax equity financing in time to fund the IA-execution security forces DP3 withdrawal.
• Withdrawal-penalty tradeoff. A project that is marginal at DP2 may rationally withdraw rather than commit to the larger DP3 exposure. See interconnection queue withdrawal penalties by RTO for the cross-RTO comparison.

Site control as the common thread

Across all three Decision Points, site control is the one variable both fully under the developer's control and most likely to fail without warning. Network upgrade cost is a function of PJM's engineering. Affected Systems schedule is a function of neighboring RTOs. Offtake and financing are functions of the broader market. But site control — option expirations, parcel modification compliance, Officer Certification accuracy, gen-tie ROW — is something every developer can audit and fix continuously through the cycle. The projects that pass DP1, DP2, and DP3 cleanly are the ones whose site control evidence is correct and current at every DP submission. For the underlying coverage thresholds, see PJM site control requirements in 2026; for the Manual 14H section grammar, see Manual 14H site control sections.

Glossary

• DP1 / DP2 / DP3 — Decision Point I, II, III. The three formal go/no-go milestones in the cycle.
• Phase I / II / III — The three engineering phases: System Impact Study, firm network upgrade study, Facilities Study.
• IA / GIA — Interconnection Agreement / Generator Interconnection Agreement.
• ASA — Application and Studies Agreement.
• MFO — Maximum Facility Output.
• POI — Point of Interconnection.
• Application Review Phase — The 15-BD / 10-BD / 15-BD deficiency cure window before Phase I begins.
• Readiness Deposit — The deposit posted at DP1 ($4,000/MW, $2M cap).
• Affected Systems — Required upgrades on neighboring transmission systems outside PJM's direct schedule control.
• Section 7.2 — Manual 14H section governing parcel modifications between Application and DP1.

What to do this week if your project is approaching a Decision Point

1. Identify your nearest DP and its election window. Confirm the deposit posting date as well as the election date.
2. Audit site control against the DP-specific bar. At DP1 confirm 7.2.2 compliance; at DP2 confirm option weight; at DP3 confirm 100 percent executed coverage.
3. Refresh your Officer Certification. Match APN list, MFO, and effective dates to the current evidence package.
4. Run the contingent facility audit. Map every contingent row to its prior queue project and score withdrawal risk.
5. Check your gen-tie ROW. Any ROW gap along the lead line is a DP3 failure mode you cannot defer.

Sources

• PJM Tariff Part VII, Subpart C — Cycle process anchor
• PJM Manual 14H — Sections 7, 8, 9
• PJM Manual 14C — Network upgrade construction
• PJM Interconnection Process Subcommittee (IPS) — education materials and meeting minutes
• PJM Inside Lines — cycle announcements and updates
• FERC Order 2023, Interconnection Final Rule explainer

Related articles

• PJM Reliability Resource Initiative (RRI) Site Control: What the 51 Selected Projects Need to Know Before TC2
• PJM Site Control Requirements in 2026: The Complete Developer Guide
• PJM Cycle 1 Deficiency Notice: How to Respond and the 5 Most Common Site Control Reasons Projects Get Flagged
• How to Read PJM Cycle 1 Phase I System Impact Study Results: A 15-Section Walkthrough
• PJM Manual 14H Site Control Sections: A Section-by-Section Reference
• Option-to-Lease Expiration and the Interconnection Milestone Calendar
• Network Upgrade Costs for Solar Interconnection
• Interconnection Queue Withdrawal Penalties by RTO
• Free PJM Toolkit