Electric Bills Will Continue to Rise After PJM Auction

Electric bills will continue to climb for customers in the PJM Interconnection regional electric grid after the most recent auction for future electricity totaled a record $16.4 billion due to rapidly rising demand for power.

The grid operator for the 13-state Mid-Atlantic region, including Pennsylvania, has been struggling in recent years to meet rapidly rising demand and modernize its rules to bring new power supplies online quickly. Much of the increase in demand is due to the rising number of data centers for AI being built across the region.

Auction prices could have been higher had a two-year price cap ordered by Gov. Josh Shapiro not been in place. The cap was set after the auction for 2025-26 saw the price of guaranteed electric capacity spike to $14.7 billion from the previous year’s $2.2 billion, an increase of about 800%, and has it continued to rise since then. Prices rose to $333.4 million a megawatt-day in this auction, up from $29 million per megawatt-day in 2024-25.

Capacity costs represent a relatively small part of retail electricity bills, but increases of more than 15% in residential and business customer bills have resulted. In PJM’s capacity auction, operators producing electricity from fossil fuels, nuclear, and renewables submit bids to provide a set amount of guaranteed power at all peak times in future years, in order to ensure there is enough available electricity.

PJM also warned that capacity purchased at the auction did not meet its reliability requirement of a 20% reserve margin. That reliability level would ensure than there would be only one blackout in 10 years due to an extreme weather event. The reserve margin now stands at 14.8%, but PJM said several mitigating factors could improve reliability. Those include an expected reduction in peak demand in the 2027-28 year, and the potential for some power plants that were to retire to continue operating.

The most recent auction “leaves no doubt that data centers’ demand for electricity continues to far outstrip new power supply, and the solution will require concerted action involving PJM, the stakeholders, state and federal partners, and the data center industry itself,” said Stu Bresler, the new PJM chief operating officer.

The independent monitor for PJM recently filed a complaint with the Federal Energy Regulatory Commission asking it to require the grid operator to add data centers only when they can reliably be served. PJM stakeholders have been unable to agree on a proposal for how data centers should be connected to the grid.