After a ninefold jump in PJM’s capacity prices last year, the clearing price for the just-concluded 2026/2027 delivery year Base Residual Auction (BRA) came in at the FERC-approved cap, $329.17/MW-day for the entire PJM footprint, securing 134,311 MW of unforced capacity generation and demand response. But there’s a lot more to this story than a marginal increase, at a particularly challenging time across all grid regions and power markets.
PJM’s communications team apparently anticipated renewed price concerns by regulators and ratepayers, getting out front by declaring “Wholesale capacity accounts for a relatively small portion of retail electricity bills; PJM would expect the cap price to translate to a year-over-year increase of 1.5–5% in some customers’ bills, depending on how load serving entities and states passing on wholesale costs to consumers. Given that prices decreased in two zones, it is possible that consumers in some areas could see a drop in retail rates.” The release also touted 2,669 MW in new generation and uprates for the first time in the last four auctions, and 1,100 MW worth of withdrawn retirements. Surprisingly, gas generation cleared 3% lower than the previous year, while cleared coal generation increased 4% from 18% to 22%. Notably, PJM bid $0 for Reliability Must Run (RMR) resources, ensuring that they would clear at the market price and prop up reliability
Still, anyone who’s had their coffee/tea/energy drink surely doubts that retail power prices will do anything but increase across the grid operator’s massive footprint, and methinks that PJM doth protest too much by saying otherwise.
But there was a “not-so-invisible hand” in that market cap, to be sure, among other factors. On January 28, 2025, PJM settled a dispute filed in December 2024 by Pennsylvania Governor Josh Shapiro. According to POWER Magazine, the Governor, who had been on the short list for VP on Kamala Harris’s ticket before he was overtaken by Minnesota Governor Tim Walz, filed a complaint with FERC last December, asserting that PJM’s capacity market design has failed to ensure “just and reasonable rates” and instead, led to extreme price volatility that imposed excessive costs on consumers without guaranteeing sufficient new generation.
In a separate article, POWER also noted Shapiro’s blatant warning to PJM at the end of February: “The governor explicitly suggested that if PJM cannot adapt, Pennsylvania may seek an independent energy strategy. We are exploring all options here in Pennsylvania, including removing ourselves from PJM, going it alone and determining if that is a better course for both consumer pricing and power generation in our common market,” he said.
Following the January settlement, which was approved by FERC in April, the Governor changed his tune, saying “PJM did the right thing by listening to my concerns and coming to the table to find a path forward that will save Pennsylvanians billions of dollars on their electricity bills.” And PJM's own simulation showed that, absent the imposed cap, the system marginal clearing price would have jumped to $388.57/MW-day, $60 higher than the actual clearing price.
I suspect we’ll see, over the next few months, across the Commonwealth and elsewhere. But it’s important to remember that these capacity payments to generators are for the June 1, 2026, to May 31, 2027, delivery year. And, who knows how many more techbros’ AI-enabled data centers will be on the grid by then, hungry for GW of new generation?
Shapiro’s concern adds to complaints from many other stakeholders that PJM’s clogged interconnection queue, too, represents a deeply flawed process and has prevented bringing new generation online, even as the grid operator has allowed significant fossil-fueled assets to retire without replacement. In fact, on Thursday, July 24, FERC ruled that PJM must make significant changes to its plan for meeting FERC’s interconnection requirements.
Although PJM had asserted that its standing process met FERC’s “Order 2023” requirements, according to Utility Dive, FERC determined that PJM had only complied in part and gave the grid operator 60 days to propose rule changes that complied fully with the order. These include explaining how network system upgrade costs will be shared; requiring transmission owners to use operating assumptions in their interconnection studies that reflect the planned charging behavior of battery storage projects; requiring that interconnection studies include an evaluation of grid-enhancing technologies (GETs); and removing language that PJM must only make “reasonable efforts” to meet specific deadlines.
Moreover, along similar but less “official” lines, Inside Climate News reported on July 23 that a bipartisan group of nine governors had sent a letter to PJM asking for the authority to nominate candidates to fill two seats on the grid operator’s Board of Managers, and for the creation of “a formal group of the PJM governors” to provide additional input to the board. The letter explained the request, saying, “At a time when PJM faces difficult decisions that could substantially raise consumer bills, we strongly believe ongoing Board-level representation of these perspectives is essential to preserving PJM’s legitimacy.” The article continued “In their letter, the nine governors cited problems including “PJM’s multi-year inability” to get more generation sources on the grid, and long-term transmission planning that “has deprived our states of thousands of jobs and billions of dollars in investment that may flow to other regions.”
PJM appears to be facing its most significant regulatory, reputational, and operational headwinds since January 2014, when a polar vortex and subsequent cold snap nearly took down its transmission system, leading to the creation and implementation of the grid operator’s Capacity Performance (CP) program. During that frigid period, about 22% of PJM generation became unavailable, exposing vulnerabilities in fuel supply and operational readiness. In response, PJM proposed CP to FERC in late 2014. It was approved in June 2015 and began implementation with auctions starting in August 2015 for delivery years beginning in 2018, and among other steps, dramatically increased penalties—into the millions of dollars—for generators who accepted capacity payments but were then unable to deliver when called upon.
In the last three years, however, PJM’s clogged interconnection queue, retiring fossil plants, and increasing load after years of little or no growth have strained the grid operator in ways that it hasn’t faced, as it enjoyed among the most solid of reputations and track record of reliability among the nations RTOs/ISOs. Add to that the unanticipated resignation of President & CEO Manu Asthana, who abruptly announced in April—with few details—that he will step down at the end of 2025. Asthana will remain as a “senior advisor to the PJM Board” through June 2026. Although he cited a personal decision to move closer to family and friends in Texas, many in the industry view his departure at least equally a response to mounting political pressures, and criticism from governors and other stakeholders across PJM’s footprint. They’ve expressed frustration over rising electricity prices, delays in connecting new and clean energy generation resources, and what some call a “crisis of confidence” in PJM’s leadership. But I think that may be a little premature…or just not warranted. Yet, anyway.
In fairness to PJM, many of the planned and implemented retirements “shorting the grid” were based on abysmally low BRA prices for 2023/2024 and 2024/2025 auctions, which settled at $41.78 MW-day and $44.33 MW-day respectively (RTO). And others happened as a result of state policies that committed to hard-deadline clean energy mandates and subsidies, such as New Jersey which committed to “100% clean energy use by 2035.”
Still in all, there's more "discomfort" among ratepayer advocates, consumer groups, and even state governors around PJM's market design, management, and costs, both energy and capacity, that ratepayers in its 13-state + District of Columbia footprint are facing. A seven-state coalition, including governors from Delaware, Illinois, Kentucky, Maryland, Michigan, New Jersey, and Tennessee declared that PJM “faces an unprecedented crisis of confidence from market participants, consumers, and the states."
It's clear that the meteoric rise of data centers—I’ve never understood that word because meteors invariably fall—has completely awakened electricity demand from the doldrums of the previous decade. And the years-long backlog in gas turbine availability from Mitsubishi, GE Vernova, and Siemens means that the BRA forward market window is still badly out of sync, if PJM is counting on simple- and combined-cycle machines to take on the load that new data centers will demand.
And in just the last month, the OBBB has sent clean energy developers and their projects into a potential death spiral, by accelerating the phase-out of tax incentives originally enacted under the Inflation Reduction Act (IRA). New solar and wind projects must now either begin construction by July 4, 2026, or be placed in service by December 31, 2027, to qualify for the clean electricity production (45Y) and investment (48E) tax credits, and even those may be compromised by an Executive Order order issued on July 7 that directs the Treasury to tighten eligibility rules and restrict broad safe-harbor provisions. Overnight, it’s a new world for ISOs and RTOs, and certainly for PJM.