Have you heard the bad news? Electricity prices are going through the roof. But, why now and what can you do to ease the pain?
It all ties back to supply and demand and the PJM Interconnection, often called just “PJM” for short, according to John Kolesnik, policy counsel for the Keystone Energy Efficiency Alliance and the Energy Efficiency Alliance for New Jersey.
PJM (derived from “Pennsylvania-New Jersey-Maryland” – the three states that started PJM) is the organization in charge of coordinating, controlling and transmitting electricity throughout all or part of 13 states (Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia and West Virginia) and Washington, D.C. All told, 65 million people rely on PJM, the largest regional transmission organization in the nation, to deliver them the electricity that we all use and rely on every day.
Why are electric prices going up?
That’s a complicated question, but supply and demand are at the root of the issue.
“Fossil fuels make up 60 percent of the PJM market’s generation capacity,” Kolesnik said. “Those plants are aging, and the reliability isn’t there, particularly in the cold weather.”
According to PJM, about 40 GW of generation is at risk of retirement by 2030. Meanwhile, 95 percent of clean energy sources, such as solar and wind energy projects, are waiting for final review and approval before they can be added to the electric grid. Couple this with increased electric load demand spurred by data centers throughout the nation and you get a recipe for disaster.
“While on the surface the problem is a supply and demand imbalance,” Kolesnik said. “There is increased demand, but new generation isn’t coming online quick enough. The imbalance is further complicated by the processes PJM adopted to govern how they consider those two sides of the equation.”
The issue came to a boil in July 2024 when PJM announced the results of its latest capacity auction, which produced record high capacity prices that could have cost ratepayers across the grid operator’s footprint $14.7 billion for the delivery year that begins in June 2025, up from $2.2 billion in the previous auction. In some areas, prices were expected to increase 10 times over the prior prices.
Help is On the Way!
Pennsylvania Gov. Josh Shapiro and several other governors filed a complaint in December with the Federal Energy Regulatory Commission (FERC) against PJM Interconnection, criticizing flaws in PJM’s capacity auction design that threaten to impose significant new price increases.
On January 29, a settlement was announced that establishes a price cap and price floor for PJM’s next two capacity auctions. PJM plans to set a $325/MW-day price cap and a $175/MW-day floor for its 2026/27 and 2027/28 delivery year capacity auctions, according to a notice PJM sent to its members. The next base capacity auction is set to be held in July.
“The governor worked with PJM to significantly lower the capacity auction price cap — from over $500/Megawatt-day to $325/MW-day — averting a runaway auction price that would have unnecessarily increased energy bills,” Gov. Shapiro said in a press release. The price cap could save PJM consumers $21 billion over two years, according to Shapiro.
What Can You Do to Save Money?
Given CMC’s business, the obvious answer is saving electricity in your home or business.
“Energy efficiency is a great way for customers to empower themselves to reduce electric demand on the grid,” Kolesnik said. “Customers can decide how much energy they use by taking steps to cut down their usage.”
Fortunately for all CMC employees, energy efficiency is something we know a lot about.