The results seemed innocuous enough. After a ninefold jump in PJM’s capacity prices last year, the clearing price for PJM Interconnection's 2026/2027 delivery year Base Residual Auction (BRA), announced on July 22, 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 seemingly marginal increase, at a particularly challenging time across all grid regions and power markets. And absent that cap, mostly the work of PA Governor Josh Shapiro, these record prices would have been even higher.
PJM’s communications team apparently anticipated renewed price concerns by regulators and ratepayers, getting out front by declaring on its Inside Lines blog that “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 pass 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.” Possible, perhaps. Not remotely likely.
Inside Lines further asserted "While not impacting this auction, PJM’s Reliability Resource Initiative this year attracted more than 11,000 MW (ICAP) in planned (emphasis mine) new projects and upgrades to existing generators, indicating 'significant interest' from investors. ICAP or installed capacity represents the maximum output of a resource. However, "significant interest" is little more than aspirational, when developers face a clogged interconnection queue, and projects that can and do drop out based from delays that tank financing, and create massive supply chain uncertainty, that puts the nail in the project's coffin.
PJM's news release also boasted 2,669 MW in new generation and uprates for the first time in the last four auctions, and 1,100 MW worth of withdrawn retirements. Not nothing, but on the scale of the nation's largest power market, not really a lot. 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 paying attention can't doubt that retail power prices will do anything but increase across the grid operator’s massive footprint, and methinks that PJM doth (glibly) protest too much by saying otherwise.
First, 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, little short of a threat, 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 market 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.
We’ll see where retail power prices go over the next few months, across the Commonwealth and elsewhere in PJM's 13-state-plus-DC footprint. 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 generation that may--or may not--be there. Because resource adequacy in PJM is far from given anymore, and stakeholders increasingly realize that. Right here in central Ohio, I'm watching them go up. And the costs to interconnect and power them is being borne in large part not by the techbros themselves, but by residential and small business ratepayers. I've written about that elsewhere here on Energy Central, and finally the national media, including Bloomberg (naturally), and even The Wall Street Journal (remarkably) are catching on and catching up.
Governor Shapiro’s concern adds to complaints from many other stakeholders, getting louder, that PJM’s clogged interconnection queue 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 “Inside” 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 period, about 22% of PJM generation became unavailable, exposing big 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 if they were subsequently unable to deliver when called upon.
In the last three years, however, PJM’s clogged interconnection queue, retiring fossil plants, and fast-increasing load after years of little or no growth have strained the grid operator in ways that it hadn’t faced. I'd argue that PJM has enjoyed among the most solid of reputations and track record of reliability among the nations RTOs/ISOs for at least 15 years, but the grid operator is in a very different and very difficult situation today. 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. A terse news release from PJM said Asthana will remain as a “senior advisor to the PJM Board” through June 2026, and, although Asthana cited a personal decision to move closer to family and friends in Texas, many in the industry view his departure at least in part because of mounting political pressures and unbridled 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. That may be a little premature…or not "fully" warranted. Yet. But the din is rising.
In fairness to PJM, some 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 and unrealistic clean energy standard mandates, such as New Jersey, which committed to “100% clean energy use by 2035.” But the massive increase last year followed by this year's rise--constrained only by Shapiro's complaint--speaks volumes that price signals in a frantic market aren't delivering more resources as intended.
And there's rising awareness and notable unhappiness among other ratepayer advocates, consumer groups, and even individual customers around PJM's basic 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 PJM's BRA forward market window is still badly out of sync, if PJM is counting on simple- and combined-cycle machines to take on growing load that new data centers will demand, long before those machines are in commercial operation. Or even in existence.
As for utility-scale renewables coming to the rescue, 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.
It's a new world for ISOs and RTOs, and certainly for PJM, and disquiet bordering on mutiny is something its leaders and managers are just not used to, or remotely ready for. A new approach, and almost certainly, new leadership is called for.
UPDATE: PJM recently and rather hastily launched a "fast-track" stakeholder process to develop rules for interconnecting data centers and other large loads across its 13 state + DC footprint. Non-Capacity-Backed Load (NCBL) is a proposed new class of electricity demand in PJM, for new, large loads of 50 megawatts or more, and the NCBL initiative is intended to manage the rapid growth of large electricity consumers, which has strained the grid and caused capacity prices to rise. While NCBL customers would not be required to procure additional capacity or participate in the annual capacity auction, they would also be subject to curtailment before other large customers during grid emergencies. Released on August 29, the grid operator's first pass at the "Critical Issue Fast Path initiative" took a fast path to nowhere, panned by the Data Center Coalition, a trade organization representing some of the largest players such as Google, Meta and Microsoft because it "exceeds PJM’s jurisdiction" and "undermines the integrity of its market framework."
Pointedly, it was also declared not viable by PJM's own Independent Market Monitor (IMM), Monitoring Analytics, which noted, unsurprisingly, that it's "unlikely data centers that want 99.999% uptime would accept having their load curtailed." In the same vein, power generator Exelon exclaimed “Nothing in the NERC reliability framework permits an RTO to pre-arrange routine load shedding of a designated customer class as a substitute for resource adequacy.”
PJM, after withering criticism from a variety of stakeholders on its initial attempt, released its updated proposal on September 15, 2025. But on October 1, PJM staff notified stakeholders that the proposal had been withdrawn and would not be revisited.