Regional Grid Operator Agrees to Two-Year Price Cap Extension

After pressure from federal and state officials, regional electric grid operator PJM Interconnection has agreed to extend its price cap on some wholesale energy costs for an additional two years.

Pennsylvania Gov. Josh Shapiro recently announced the extension of the cap on the maximum price PJM will pay for guaranteed electricity during its twice-yearly capacity auctions. The cap was first put in place in 2024. “This is going to save 67 million Americans $27 billion on their energy bills – bringing the total we’ve saved for PJM customers up to $45 billion,” he said. That translates into a saving of $575 for every household in Pennsylvania over the next four years, a release indicated.

PJM, which manages the electric grid for 13 Mid-Atlantic states including Pennsylvania, has been struggling in recent years to modernize its regulations as the demand for energy is rising rapidly at the same time that fossil-fuel powered generation plants are retiring and new generation is not coming online fast enough. It holds capacity auctions to secure guaranteed power generating capacity during times of peak demand, such as during extreme weather events.

While capacity prices represent only one part of residential utility bills, the cost spiked by 900% between the 2024-25 and 2025-26 service years. Much of the increased demand is due to the rising number of energy-intensive data centers being built, and PJM has also been working on a plan to address how those large-load customers should be interconnected and who should bear the cost.

Shapiro sued PJM over its capacity auction rules, leading to the price cap of $325 per megawatt-day, which saved billions for ratepayers in succeeding auctions. However, the cap was due to expire unless it was extended.

In January, governors in PJM states and federal energy officials reached a Statement of Principles urging the grid operator to adopt a plan to speed up construction of new power generation projects to meet rising data center demand while ensuring that the costs are paid by developers and not consumers. Shortly thereafter, PJM announced it had developed an interconnection plan, which must be approved by the Federal Energy Regulatory Commission.

For now, while demand continues to rise and PJM works to bring new generation online, customers will have some protection from rapidly rising bills.