Pa. Complaint Claims Rising Power Prices Due To PJM Auction Rules

Pennsylvania Gov. Josh Shapiro recently filed a complaint against the regional electric grid operator, claiming that flaws in how it purchases power from electric producers is driving up prices for residents.

The complaint was filed with the Federal Energy Regulatory Commission against PJM Interconnection, a nonprofit regional transmission organization that manages the electricity market for 13 Mid-Atlantic states and the District of Columbia.

“PJM operates a capacity market, which means that operators are paid to commit to providing energy in the future. Over the last several years, demand for energy has risen rapidly but PJM has been slow to allow new power sources onto its grid – and as a result, PJM capacity prices have skyrocketed,” a statement from Shapiro’s office said.

The most recent capacity auction, which sets the prices for the power being purchased, was held in July 2024 and resulted in costs of $14.7 billion for 2025-26. That represents a more than 800% increase from the previous year, and will result in a spike in electricity prices for the 65 million residents in PJM’s footprint.

If changes are not made to PJM’s rules, the administration claims that the next auction in July 2025 could result in over $20 billion in unnecessary energy costs for consumers across the region.

The main problem identified in the complaint is that PJM is not currently allowing new power plants to request connection to its grid. “It is currently physically impossible for new resources to respond to high (auction) signals and enter PJM’s marketplace,” the complaint states, due to PJM’s auction rules.

PJM said in a statement that it has been warning for more than two years that the power supply is not keeping up with demand and that outages could occur during peak demand periods. “This possibility has been growing, primarily as a result of state and federal policy decisions that are pushing generators to retire prematurely, and also due to unprecedented and rapidly growing data center construction,” the statement said. The retiring power plants use fossil fuels, which provide 24/7 generation but also create greenhouse gas emissions that are subject to stringent limits.

PJM has been in ongoing talks with state officials over proposals to amend its capacity auction rules and is already working with federal regulators.

“PJM shares the concern about rising prices caused by this supply-demand imbalance, and we’ve taken multiple steps to mitigate it. These include already asking our federal regulator for permission to lower the market price cap discussed in the governor’s complaint and proposing to allow for more shovel-ready generation projects to be added to the grid expeditiously.”

It has also approved 50,000 MW of renewable energy projects, most of which have not been connecting to the grid “due to factors outside of PJM’s control, including state permitting, project financing and global supply chain challenges,” the statement said.