Who is PJM?

PJM, or Pennsylvania New Jersey Maryland Interconnection, is one of seven regional transmission organizations (RTOs) in the U.S. It manages the wholesale electricity market across 13 states and Washington, D.C., helping to keep power reliable and competitively priced across a large region.

Navigating Rising Capacity Costs in PJM

If you're a commercial electricity customer in the PJM region, here’s what’s new this month and why a long-term supply agreement has never been more important.

What’s Changed? Capacity Prices Spike Again

• In the latest auction, capacity prices for the 2026–2027 delivery year reached $329.17 per megawatt-day (MW-day)—the maximum allowed by federal regulators, a 22% increase over last year’s record high of $269.92/MW-day.
• PJM expects this spike to result in 1–5% higher bills for many ratepayers beginning June 2026, though impacts vary by state and cost recovery methods.
• Total capacity costs jumped from $14.7 billion in the prior year to $16.1 billion—an increase of more than $1 billion.

What’s Driving the Increase?

Energy-hungry data centers—especially those tied to AI and Big Tech—now account for over 90% of PJM’s rising power demand. By 2030, system demand is expected to grow by 32 GW, with 30 GW linked directly to data center expansion.

On the supply side, PJM remains heavily reliant on natural gas, coal, and nuclear, which together provide nearly 90% of generation. Renewables, including hydro, wind, and solar, make up just 8%. Adding to the challenge, PJM’s interconnection queue is clogged, particularly for clean energy projects. To address this, PJM has partnered with Google to use AI to accelerate approvals, with the goal of cutting timelines from more than 40 months down to just one to two years by 2026.

What It Means for Your Business

• Rising Costs Are Here: Many businesses are already facing a 1–5% cost increase in their electricity bills starting June 2026.
• Broader Impacts to Come: Analysts warn residential rates could climb 30%–60% by 2030 if demand keeps rising while new infrastructure lags.



The Smart Strategy: Lock in Long-Term Supply Agreements

Now is the ideal time to consider a long-term third-party energy supply contract. Here’s why it matters:

1. Protect Your Budget: Locking in rates shields your business from volatile capacity price jumps.
2. Plan with Confidence: Predictable energy pricing supports better budgeting and forecasting.
3. Green and Flexible Options: Many contracts offer renewable energy choices or demand response options to reduce peak use and lower costs.
4. Ride the Wave of Reform: With PJM investing in AI-powered interconnection and states negotiating reforms (e.g., PA’s new auction cap to avoid explosive cost spikes), now’s the time to benefit from market improvements.
   

Call to Action

At Electric Advisors, Inc., we help businesses navigate the rising costs in PJM’s electricity market. With demand growing rapidly and capacity prices climbing, it’s important to explore options that provide stability and cost control. A well-structured supply strategy can protect your budget and bring confidence in an uncertain market. Contact us to learn more about how we can support your energy planning.