Mid-Atlantic Faces Record electricity Price Hikes as PJM Capacity Auction hits New High
Philadelphia,PA – Consumers across a meaningful portion of the Mid-Atlantic region are bracing for another round of electricity bill increases following the latest capacity auction conducted by PJM Interconnection,the operator of the regional electricity grid. The auction, designed to ensure future electricity supply during peak demand periods, resulted in a record-breaking price for the second consecutive year, impacting approximately 67 million people.
The PJM capacity auction, which covers Pennsylvania, Delaware, New Jersey, and parts of ten other states and Washington D.C., concluded with a price of nearly $330 per megawatt-day. This represents a 22% surge from last year’s price of $270 per megawatt-day. These costs are ultimately passed on to consumers by electric utilities.
This latest price hike follows a period of significant increases.Last year’s auction price of $270 per megawatt-day was already a record, leading to a 10% increase for customers in the philadelphia area, which began phasing in on June 1 and will continue through the end of 2026. The impact of this year’s auction will be felt starting next June, adding to existing increases.
the process has drawn criticism, notably from Pennsylvania Governor Josh Shapiro.Late last year, Shapiro filed a complaint with federal regulators, arguing that the auction process is flawed and leads to higher consumer prices without guaranteeing grid reliability. His office described the auction as the “largest unjust wealth transfer in the history of U.S. energy markets.”
In response to the complaint, PJM and Governor Shapiro reached an agreement to cap the price at approximately $330, a cap that was met by this year’s auction results.
despite the price cap, PJM anticipates that electricity bills in its service territory will likely increase by an additional 1.5% to 5% for moast ratepayers, depending on how states and utilities implement the cost pass-through.
“This is the highest price it’s ever been,” stated Abe Silverman, an energy consultant and research scholar at Johns Hopkins University, who has prior experience with NRG Energy, the New Jersey Board of Public utilities, and the Federal Energy Regulatory Commission. He added, “The rate of increase is slowing, but it’s still going to be painful for consumers.”
Understanding the PJM Capacity Auction and its Impact on Your Electricity Bill
The PJM capacity auction is a critical mechanism for ensuring the reliability of the electricity grid in the Mid-atlantic region.It operates by paying power plants to commit to being available to generate electricity when needed, particularly during periods of high demand, such as extreme heat or cold. It also compensates entities for reducing their electricity consumption if necessary.
Key Facts about the PJM Capacity Auction:
Purpose: to secure sufficient electricity generation capacity to meet future demand and ensure grid reliability. Participants: Power generators, demand response providers (entities that reduce their electricity usage), and consumers (indirectly through their utilities).
Process: An auction where suppliers bid to provide capacity. The highest accepted bid sets the price for all accomplished bidders.
impact on Consumers: The wholesale price steadfast by the auction is passed on by electric utilities to their customers, resulting in higher electricity bills.
PJM Interconnection: The entity that manages the electricity grid and conducts the capacity auctions across its service territory, which includes Pennsylvania, Delaware, New Jersey, and parts of ten other states and Washington D.C.
Recent Trends: The capacity auction prices have seen significant increases in recent years, with record highs set in both the 2023 and 2024 auctions. Criticism: Concerns have been raised about the fairness and effectiveness of the auction process, with allegations that it leads to excessive price increases for consumers without a guaranteed improvement in grid reliability.
Regulatory Action: The Pennsylvania Governor’s office has taken legal action to challenge the auction process, leading to a price cap agreement with PJM.
What this means for you:*
The recent auction results indicate that consumers in the PJM region should expect their electricity bills to rise further. The exact percentage increase will vary depending on individual utility rates and how they pass these costs along. This adds to existing increases that many customers are already experiencing.
The ongoing debate surrounding the capacity auction highlights the complex challenges in balancing grid reliability with affordability in the face of evolving energy markets and environmental considerations.