How the Latest PJM Auction Impacts 2026–2027 Energy Costs
PJM’s latest capacity auction set a new record price for the 2026–2027 delivery year, signaling continued pressure on the regional power grid. These results will directly impact electricity costs for businesses and consumers across the PJM footprint starting in mid-2026.
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Key Takeaways
The 2026–2027 PJM capacity auction resulted in the highest capacity price ever recorded, reflecting ongoing supply constraints and rising electricity demand. With limited new generation coming online and reliability margins tightening, both businesses and policymakers are facing growing concerns around affordability and grid stability. Here’s what you need to know about how these auction results will affect energy costs and long-term planning:
- The 2026-2027 PJM capacity auction concluded with a final capacity price of $329.17/MW-day, creating a 22% rate hike from 2025.
- The increase in PJM energy prices will affect residential and commercial consumers throughout 13 states.
- Businesses can expect commercial energy bills to increase by another 1-5% starting in June 2026.
- This is the highest capacity rate on record, exceeding the price cap approved by the FERC.
- The previous record was set in 2025 in which capacity rates skyrocketed by 833% from 2024 rates.
- Business owners need to create a proactive energy strategy to navigate increasing commercial energy prices.
What Are the 2026-2027 PJM Capacity Auction Results?
On July 22, 2025, PJM’s capacity auction concluded with a final capacity price of $329.17/MW-day, creating another 22% increase in capacity costs. These capacity auction results maxed out the pricing collar approved by the FERC, highlighting the ongoing struggle to acquire enough capacity to meet growing demand.
Despite the second year of increased capacity costs, PJM was able to secure 134,311 MW of unforced capacity generation and demand response. This marks the first time the PJM grid has had new capacity additions in four auctions. The auction finalized with just 139 MW over the projected reliability requirement, highlighting the ongoing imbalance in supply and demand.
Officials at PJM estimate that this capacity rate increase will raise consumer energy bills by 1-5%, depending on your region and usage patterns.
What Happened to the Original $325/MW-day Price Cap?
In late 2024, the FERC approved a preliminary pricing collar of $175-325/MW-day. However, during the most recent auction, PJM adjusted the price cap based on their updated Reference Resource AUCAP Factor, setting the final ceiling at $329.17/MW-day.
The Actual Reference Resource AUCAP Factor is a performance-based adjustment that PJM applies to determine the final price cap at the time of auction. It’s based on actual power plan performance and output after factoring in outages.
How Is PJM Improving Grid Reliability?
Since the shocking results of PJM’s capacity auction, grid operators have been working hard to improve grid reliability and stabilize costs. Slowly, PJM power supply is improving through the following measures:
- New Capacity Additions: The PJM added 2,669 MW of new generation to the grid. This is the first PJM capacity addition in four auctions.
- Withdrawn Retirements: Since the 2024 capacity auction, 17 power plants postponed their retirement, retaining 1,100 MW for the PJM grid.
- Long-Term Infrastructure Investments: While it takes years to complete upgrades and new generating projects, PJM has 11,000 MW of planned projects underway.
Will This Be Enough to Meet Growing Electricity Demand?
Electricity demand in the PJM power grid is growing rapidly due to data center expansion, the electrification of buildings and vehicles, and economic growth. For the 2026-2027 delivery year, PJM’s peak load forecast is 5,400 MW more than 2025.
PJM supply and demand is still tight, with only 139 MW of additional clearance over the grid reliability requirement. Until more capacity is added to the grid, consumers will experience higher rates and a greater likelihood of localized outages during peak demand periods.
How States in the PJM Grid Are Responding to Auction Results
As the current supply/demand gap widens, governors within the PJM service area are experiencing a crisis of confidence with the RTO. After the 2024 capacity auction results, most states within the PJM grid saw 10% to 20% increases in energy costs.
Governors from Delaware, Illinois, Kentucky, Maryland, Michigan, New Jersey, Pennsylvania, Tennessee, and Virginia released a letter to PJM on July 16, 2025, to address their concerns about grid reliability, cost increases, and its impact on their residents:
“At a time of rapidly rising load growth, PJM’s multi-year inability to efficiently connect new resources to its grid and to engage in effective long-term transmission planning has deprived our states of thousands of jobs and billions of dollars in investment that may flow to other regions.”
Their letter continues with additional criticisms about ineffective leadership in PJM and how these governors would like more engagement with the RTO as a whole. If capacity additions aren’t made and reliability remains inconsistent, some states may consider leaving the PJM grid altogether. New Jersey’s General Assembly passed a bill on June 30 for their Bureau of Public Utilities to consider leaving the RTO. Similar discussions are being held among policymakers in Maryland and Pennsylvania as well.
Last Updated April 28th 2025
Big Changes Are Coming for Many States in 2025
What is PJM Interconnection?
PJM Interconnection is a regional transmission authority responsible for managing the electrical grid across 13 states. To ensure a reliable energy supply, PJM conducts annual capacity auctions to make sure they have the resources needed to meet future electricity demand.
The outcome of these auctions determines capacity charges—fixed utility rates that account for roughly 25% of a business’s monthly energy bill. Below, we analyze the outcome of PJM’s latest capacity auction and its far-reaching impact on commercial energy consumers.
Understanding the 2025-2026 PJM Capacity Auction Results
On July 30th, 2024, PJM Interconnection conducted their capacity auction for the 2025-2026 delivery year. In order to secure enough power supply to meet the projected energy demand, PJM capacity prices will increase by an astounding 833%. Consumers across the PJM service area will start feeling the impact of increased prices starting in June 2025.
Why is the PJM power grid in so much trouble, exactly? Over the past several years, PJM has decommissioned more power plants than have been constructed in their service area. Many PJM power plants were retired due to aging infrastructure and a push towards renewable energy sources. However, replacement projects have not kept pace with demand. This leaves the PJM power grid at a critical imbalance between supply and demand. It’s especially troubling because electrical demand is projected to increase by over 3,000 Megawatts (MW) between 2025-2026.
This type of imbalance leads to skyrocketing energy prices and long-term reliability concerns. For businesses, this imbalance highlights the need to create proactive energy strategies and secure low energy rates to protect themselves against rising prices and reliability issues.
How PJM Plans to Address Reliability Challenges
PJM is working to address the serious supply and demand challenges brought to light by the recent capacity auction results. This imbalance has led to complaints from consumer advocates, who argue that PJM’s current market practices have caused unfairly high energy prices that hurt both businesses and residents.
To address these issues, PJM has asked the Federal Energy Regulatory Commission (FERC) to delay future capacity auctions by about six months. This extra time would allow PJM to make important market regulation updates that improve reliability and reduce costs. PJM has also proposed changes to make sure adequate energy resources are available to meet future demand. One proposal involves increasing incentives for energy generation to expedite essential infrastructure projects. These steps are part of PJM’s effort to create a more reliable and balanced energy system moving forward.
FERC Complaints Lead to PJM Capacity Auction Changes
In response to the drastic increase in PJM prices, Pennsylvania Governor Josh Shapiro filed a lawsuit with federal energy regulators in December 2024. In his complaints to the FERC, Governor Shapiro argued that PJM’s current auctioning system causes unnecessary energy costs for PJM’s 65 million consumers, including 13 million Pennsylvanians. If the current auction flaws weren’t addressed, the July 2025 auction was projected to result in billions of additional unnecessary energy costs.
The Governor worked directly with PJM to craft a better solution for addressing runaway auction prices across PJM’s service areas. Together, they lowered PJM’s capacity auction cap – from over $500/Megawatt-Day to $325/Megawatt-Day. They also established a capacity auction floor of $175/Megawatt-Day for the 2026/27 and 2027/28 delivery years. Additionally, Governor Shapiro made a commitment to meeting the need for new generation and will complete more power projects throughout Pennsylvania. By the end of January 2025, PJM and Governor Shapiro finalized their agreement. These measures will help consumers save over $21 billion in utility costs and create a more stable pricing model for years to come.
Breakdown of 2025-2026 PJM Capacity Auction Prices
To gain a better understanding of the magnitude of the July 2024 PJM capacity auction, it’s important to compare 2024 to 2025 delivery years. We’ve provided a breakdown of the current and future capacity charges from PJM:
PJM’s agreement with Governor Shapiro will stabilize pricing in future auctions so consumers don’t experience another 833% increase. However, the new auction pricing structure also indicates that utility capacity prices will likely never return to 2024 levels. Now is the time to start creating a long-term strategy to manage future energy costs.
PJM & the FERC Approve Capacity Pricing Collar
On April 21, 2025, the Federal Energy Regulatory Commission came to a pricing collar agreement with PJM. For the 2026-2027 and 2027-2028 delivery years, PJM’s capacity auction will have a pricing floor of $175/MW-day and a pricing cap of $325/MW-day. The two agencies came to this agreement to help keep capacity costs manageable while PJM addresses supply shortages throughout their service area. This price collar will be in effect for the upcoming 2026-2027 capacity auction held in July and will remain in effect through 2028.
Who Will Be Affected by Increasing PJM Power Prices?
Businesses and residents across PJM’s service area will be impacted by rising capacity charges. The PJM power grid supplies electricity to Ohio, Pennsylvania, West Virginia, Virginia, Washington D.C., New Jersey, Maryland and Delaware. They also service specific regions of Illinois, Indiana, Kentucky, Tennessee, Michigan, and North Carolina.
While all customers in the greater PJM map will have to adjust to rising energy rates, some regions will experience a greater impact than others. For example, Maryland’s Baltimore Gas and Electric zone faces 73% higher capacity fees than the rest of PJM. Similarly, the Dominion zone, serving areas of Virginia and North Carolina, faces 65% higher capacity fees than the rest of PJM’s power grid.
These regions have been affected by a higher rate of power plant retirements. Additionally, these regions recently adopted new market rules to account for extreme weather conditions, like harsh winters or hurricane season. As a result, customers in these areas will face significantly higher business energy costs in the near future.
What is the Impact of PJM Capacity Prices on Business Energy Costs?
Most businesses in the PJM power grid can expect their commercial energy bills to increase by 29% or more starting in June 2025. Capacity charges, which account for a quarter of your business energy costs, are passed directly onto consumers. These fees are determined by the result of PJM’s capacity auction and passed down to utility companies who adjust their service fees accordingly.
Capacity charges are reflected in both residential and commercial energy bills. Unfortunately, these fees are non-negotiable, even within a deregulated energy market.
What Energy Experts are Saying about PJM’s 2025 Capacity Charges
Industry experts weigh in on the implications of these auction results for businesses and the broader energy market.
“The significantly higher prices in this auction confirm our concerns that the supply/demand balance is tightening. The market is sending a price signal that should incent investment in resources.”
PJM Chief Executive Officer Manu Asthana
“You don’t have to navigate this market change alone. Partnering with an industry expert can help your business find unique solutions to reduce the impact PJM will have on your bottom line.”
Mike Naughton, CEO / Founder of Integrity Energy
“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. My Administration will continue to work to ensure safe, reliable, and affordable power for Pennsylvanians for the long term.”
Pennsylvania Governor Josh Shapiro
Proactive Solutions for Combatting Increasing Energy Costs
In light of rising energy costs, taking a proactive approach to your business’s energy management is crucial. Waiting until June 2025 to adjust your strategy could put your business at a financial disadvantage. To remain competitive and stay ahead of market volatility, there are some effective steps you can take now:
- Secure a Low, Fixed-Rate Plan: While you can’t negotiate utility-related charges, you can negotiate your electricity supply rate with your preferred supplier. Locking in a low, fixed-rate can help protect your business from the sharp price increases expected for 2025-2026.
- Choose a Multi-Year Contract: Most commercial energy plans offer long-term contracts, enabling you to lock in a low rate for several years. Long-term energy contracts can help you stabilize costs well beyond the 2025-2026 delivery year.
- Consider Energy Efficiency Upgrades: Improve your company’s energy efficiency by conducting an energy audit or completing projects like LED lighting retrofits or HVAC upgrades. Becoming more energy efficient helps decrease your peak load contribution (PLC), helping to mitigate the impact of increased capacity costs.
- Enroll in a Demand Response Program: Many utility companies offer demand response programs that offer incentives or lower rates for curtailing usage or shutting down operations during peak demand periods.
- Partner with an Energy Expert: Leverage the expertise of an energy consultant, like the experts at Integrity Energy, to create a customized energy strategy. Together, we can help your business establish a cost-effective management plan tailored to your unique operational and budgetary needs.
By implementing these proactive measures, you can minimize the impact of rising capacity charges and set your business on a path to long-term energy savings and stability.
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