Did You Know PJM Electricity Market Rates Are Jumping 20%? Here's Why
Electric Advisors, Inc. wants to help businesses understand rising utility costs
What is PJM?
PJM (Pennsylvania - New Jersey - Maryland Interconnection) is one of seven regional transmission organization that coordinates the movement of wholesale electricity across 13 states and the District of Columbia. It ensures the reliability and security of the power grid while operating a competitive electricity market. PJM mages all, or part of, Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, and West Virginia, as well as the District of Columbia.
How To Navigate Rising Capacity Costs In The PJM Market
Are you a commercial electricity rate payer in the PJM market area feeling the pinch of rising capacity costs? At Electric Advisors, Inc., we understand your concerns and are here to guide you through the challenging landscape.
In this post, we'll be explaining the reasons behind the increase, its impact on your business, and how locking in longer-term third-party electricity supply agreements can be your solution.
The Problem: Rising Capacity Costs
Capacity costs are essential fees that ensure power plants remain operational and capable of meeting electricity demand, even during peak times. Recently, these costs have surged dramatically. For the 2025/2026 delivery year, PJM's capacity prices have jumped up to $269.92/MW-day from $28.92/MW-day in the previous auction.
This sharp increase is due to factors like generation shortages, rising demand, and regulatory pressures. As a result, commercial electricity rate payers will see notable hikes in their electricity bills.
The Impact: Higher Operational Expenses
Starting in June 2025, the rise in capacity costs will lead to higher electricity bills for commercial customers. On average, you can expect your electric bills to increase by an additional 2-4¢ per kWh, potentially leading to a 20-30% rise in overall energy costs.
This means a significant increase in operational expenses, which can impact your profitability and competitiveness.
As an example, if your business is using 300,000 kWh per year, you will see a price increase ranging from $6,000 to $12,000 per year, depending on your utility service area.
The Solution: Long-Term Third-Party Electricity Supply Agreements
At Electric Advisors, Inc., we believe in empowering businesses to take control of their energy costs. One effective strategy to mitigate the impact of rising capacity costs is to lock in a longer-term third-party electricity supply agreement. Here’s how this can benefit your business:
- Price Stability: Long-term agreements provide predictable pricing, shielding your business from market volatility and sudden price spikes.
- Cost Savings: By securing a fixed rate for electricity, you can avoid the higher costs associated with fluctuating capacity prices.
- Budget Certainty: Predictable energy costs allow you to plan your budgets more accurately, ensuring financial stability.
- Sustainability: Many third-party suppliers offer renewable energy options, helping you meet your sustainability goals while managing costs.
- Demand Response: Having the ability to reduce your load during peak energy usage and deriving income from your actions.
The Transformation: Financial Stability and Sustainability
By understanding the factors driving these increases and exploring long-term third-party electricity supply agreements, you can effectively manage your energy expenses and ensure financial stability.
Locking in a longer-term agreement not only provides price stability and cost savings but also supports your sustainability efforts, making it a smart choice for businesses navigating the evolving energy landscape.
Call To Action
At Electric Advisors, Inc., we're here to help you make informed decisions about your energy needs. Contact us today to learn more about how we can assist you in securing a stable and cost-effective electricity supply.
