Electricity Prices Continue To Surge in PJM Region

The cost of electricity continues to climb in the Mid-Atlantic region, as grid operator PJM Interconnection works to maintain adequate power supplies at the same time that demand is growing rapidly.

A year after PJM experienced an 800% increase in the capacity price for wholesale electricity, the regional transmission organization held its capacity auction for 2026/27 earlier this month. The auction resulted in another increase in the cost of guaranteed electric supply, rising to $16.1 billion, a 9.5% increase. While not as dramatic as 2024, when capacity prices spiked to $14.7 billion from the previous year’s $2.2 billion, the results indicate that supply and demand conditions continue to be tight. The auction secured a total of 146,244 megawatts (MW) of power, slightly more than PJM’s projected reliability requirement of 146,105 MW.

Capacity costs represent a relatively small part of retail electricity bills, but are expected to result in a 1.5% to 5% increase in some customers’ bills in the coming months. This increase would be on top of a 5% to 16% increase resulting from last year’s capacity price spike.

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. Over the last several years, demand for energy has risen rapidly but PJM has been slow to approve new power sources onto its grid, leading to a supply-demand imbalance.

This year’s increase may have been held in check by an agreement PJM reached with the Federal Energy Regulatory Commission after Pennsylvania Gov. Josh Shapiro filed a complaint over what he said were flaws in PJM’s rules that were unnecessarily driving up prices. That agreement set a price cap of $329.17 per megawatt-day for power, which was reached throughout PJM’s 13-state footprint.

PJM noted that operators are responding the higher prices by investing in new power generation facilities. The auction had 2,669 MW of new generation and generation updates available. At the same time, 17 generating units with about 1,100 MW of power withdrew their retirements and will remain in operation. Other long-term investment is also being attracted, although it may be years before it comes online.

However, PJM said that demand is growing rapidly, with peak load for the 2026/27 year increasing by more than 5,400 MW. This is being driven largely by data center expansion, electrification, and the growing economy.

As PJM continues to make changes to bring new power generation projects online quickly, some groups are questioning whether data center operators are benefiting at the expense of residential ratepayers, and urging that clean energy sources, such as solar and wind, continue to add to the energy mix. Wind and solar account for just a fraction of the power purchased by PJM.

“PJM will stay reliable in 2026 thanks to the increase in renewable power. However, these low-cost resources still only account for 4% of PJM’s supply, so PJM must continue to significantly speed up approvals of the 85 gigawatts waiting to connect,” said a statement from Tom Rutigliano, senior climate and energy advocate at the National Resources Defense Council. “The only real solution to higher energy prices is to keep adding more renewable energy and storage to the grid.”