Headlines have blared over the last year regarding the new load-growth projections facing electric utilities and what that new demand could mean for monthly bills. Now, customers within the PJM Interconnection are looking ahead to higher rates thanks to this growing load paired with delays in adding new generating resources to the grid.

PJM’s situation is unique, but its recent jump in cost for guaranteeing future generating capacity, with another likely to come in December, offers a vision of what could result across the nation if this disconnect between supply and demand continues to widen.

The PJM Interconnection is the nation’s largest grid operator, covering all or parts of 13 states and the District of Columbia. As regional transmission organization (RTO) for this area, PJM is also the clearinghouse for setting wholesale electricity prices paid by its more than 1,100 member utilities. Its late-July auction for 2025–2026 capacity—which guarantees peak-period power during that 12-month period—saw bulk-power costs climb to $14.7 billion, up from the $2.2 billion settled on for current-year purchases. The effect on individual customers will vary because rates are set at the state and individual utility level. Some Maryland ratepayers, for example, could see hikes of up to 24%, according to the state’s ratepayer advocate.

PJM officials say plant retirements are driving prices higher as older coal and natural gas generators age out of operation. Additionally, the RTO recently revamped its reliability rating system to consider problems that remaining fossil fuel plants could face in extreme temperature situations, which eliminated several other plants from consideration. It also raised its installed capacity reserve margin to ensure adequate supplies in the case of severe weather outages. At the same time, demand is set to rise, especially in states such as Ohio and Virginia, where new advanced manufacturing and data center facilities are under construction.

At least one generation company within PJM’s territory is postponing shutdown plans to take advantage of climbing prices in the December auction, which will set prices for 2026–2027 (auction periods run from June 1 through May 31 of the following year). Middle River Power, which operates the 540-megawatt gas-fired Elgin Energy Center in Elgin, Ill., had been planning to shutter the plant next June, but now plans to keep the four-unit facility running.

So, what’s next?

Environmental and customer advocates also note the role PJM’s slow interconnection-approval process is playing in this market-driven price spike. According to the Natural Resources Defense Council, 268 gigawatts (GW) of new capacity are currently awaiting the OK to come online in the region, with 95% of that supply being renewable. The group analyzed a what-if scenario with 30% of the backlogged renewables operational and able to bid in the July auction. They found that adding just 7 GW of those low-cost renewables into the bidding could have lowered prices by as much as 63%.

So, how could this small addition have such a big effect on costs for the 135 GW of power that cleared PJM’s auction? The answer lies in how these power purchases work. The RTO puts out a request for bids to reach their target capacity, with the lowest-bid resources entering the queue first—these are most likely renewable sources, with zero fuel costs and relatively low operating expenses. Then, successively higher-cost bids, typically fossil fuel plants with higher operating expenses, are added until the target capacity is reached. At that point, all suppliers are paid at the level of the highest accepted price. So, 7 GW of new renewables could displace the same amount of higher-cost natural gas or coal, driving down the price for the entire auction.

While PJM might be seeing the highest price hikes now, energy consulting firm ICF anticipates average U.S. electricity demand could rise 57% by 2050, driven by building and transportation electrification, data center growth, cryptocurrency mining and battery and fuel cell manufacturing. PJM’s mid-Atlantic region could see demand grow by up to 68% during the same period, according to ICF figures. And costs could rise even faster, with wholesale power prices climbing an average of 19% by 2028.

December’s 2026–2027 capacity auction isn’t likely to give ratepayers much relief, but they could start to see some downward movement by next June, when prices are set for 2027–2028. In August, the organization announced it is on track to give go/no-go decisions on about 72 GW in new, mostly renewable or hybrid generation by the third quarter of 2025, with an additional 158 GW over the next three years. And another 38 GW of projects have cleared PJM’s process but have yet to be built.

Demand will continue to grow as the RTO attempts to catch up, so price volatility could continue for the foreseeable future. 

CAVAD / STOCK.ADOBE.COM