By Mark Jaffe, EUCI energy writer
Prices for guaranteed power in the PJM Interconnection – through a capacity auction – rose 22% from last year’s price to $329.17 a megawatt-day, the nation’s largest grid operator announced July 22.
The jump would have been even sharper at $389 a megawatt-day, if the PJM had not agreed to putting a $329 megawatt-hour price cap on the auction in response to a complaint filed with federal regulators.
Last spring’s capacity auction sparked protests across the 13-state grid when the prices soared to $269.92 from a base of $28.92 megawatt-day.
Total costs for the 2024 auction jumped sevenfold compared to the 2023 auction, reaching $14.7 billion. The 2025 auction cost hit $16.1 billion, a 9.5% year-over-year increase.
Costs would have been higher if the PJM had not agreed to the price cap in response to a complaint filed with the Federal Energy Regulatory Commission by Pennsylvania Gov. Josh Shapiro.
While wholesale capacity prices make up a relatively small portion of retail electricity bills, residential customers could see their bills raise between 1.5% and 5%, depending on the state, PJM said.
Governors from 11 states – both Democratic and Republican administrations – sent a letter to PJM on July 15 warning that deficiencies in the planning and operation of the grid “threaten the bedrock reliability and affordability our consumers expect and deserve.”
“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,” the governors’ letter said.
“Today, across the region, discussions of leaving PJM are becoming increasingly common,” the letter said.
A key ingredient in the high auction prices has been a backlog in getting new generation projects connected to the grid.
“PJM continues to focus on enhancing its process for connecting new generation resources onto the system, which includes clearing all the projects in its transition queue over the next 18 months,” the grid operator said in a statement, adding that more than 60% of the backlog has been processed.
In the auction, PJM purchased 134,311 MW of capacity. Gas-fired generation made up for 45% of the capacity, followed by nuclear at 21%, coal at 22%, hydroelectric at 4%, wind at 3% and solar at 1%, according to PJM.
There was also 8,010 MW of demand response, a method of curtailing demand during peak periods by having customers reduce their loads.
The auction and the resources selected, however, drew criticism from consumer groups.
“While we are relieved that the negotiated price cap prevented capacity costs from soaring even higher, this record price spike is unacceptable,” Sarah Moskowitz, executive director of the Chicago-based Citizens Utility Board, said in a statement.
“The power grid operator’s policy decisions too often favor outdated, expensive power plants and needlessly block low-cost clean energy resources and battery projects from connecting to the grid and bringing down prices,” Moskowitz said.
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