PJM Power Prices Again Hit Cap, Reliability Falls

Electric customers in the Mid-Atlantic region served by grid operator PJM Interconnection will continue to see higher bills after its most recent auction for future electricity again reached the temporary price cap, largely due to increasing demand from data centers.

PJM reported that the capacity auction price cap of $325 per megawatt-day (MW-day) for the period beginning in June 2028 was reached and a total of 138,318 MW of guaranteed 24/7 electric supply was obtained for $16.4 billion. However, for the second time the auction fell short of PJM’s reliability requirement and increased slightly from the previous auction. While PJM maintains it will still be able to reliably provide energy, the shortfall means that it is operating with slimmer reserves and a greater level of risk in the event of an extreme weather event that causes more demand for heating or cooling.

The grid operator for the 13-state Mid-Atlantic region, including Pennsylvania, has been struggling meet rapidly rising demand and modernize its rules to bring new power supplies online quickly after several decades of flat growth. Much of the increase in demand is due to the rising number of data centers for AI being built across the region and Utility Dive reported that 38% of the recent auction’s cost was due to data center demand.

Auction prices could have been higher had a temporary price cap ordered by Gov. Josh Shapiro not been in place, reaching $554.72 per MW-day in most of the region. 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 continued to rise since then. A consortium of governors representing states in PJM’s footprint are pressuring the grid operator to make changes to quickly address rising costs and the need for more power.

“These auction results show that demand for electricity continues to grow faster than electricity supply,” said PJM President and CEO David Mills in a statement. “At the same time, PJM recognizes how this supply-and-demand imbalance impacts the reliability of the system and costs for consumers.”

PJM said it is working on several fronts to address the problem, including planning a “reliability backstop procurement,” a one-time auction later this year where data centers and utilities would buy a specific amount of capacity, with utilities directly billing large-load customers for the needed power and grid upgrades so that the cost does not fall on consumers. The procurement’s average cost would be capped at $555/MW-day. The plan must still be approved by the Federal Energy Regulatory Commission.

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.