PA Environment Digest Blog: PUC House Budget Hearing: We Aren’t Going To Build Our Way Out Of Electric Generation Shortfalls On PJM Grid; We Need To Diversify Our Generation Sources

On March 3, Public Utility Commission Chair Stephen DeFrank, Vice Chair Kimberly Barrow, Commissioner Katie Zerfuss and Commissioner John F. Coleman Jr. appeared before the House Appropriations Committee to answer questions about the Commission’s 2025-26 budget request.

Many of the questions at the hearing dealt with issues related to dramatic increases in energy demands from A.I. data centers and cryptocurrency miners that are coming faster than new electric generation resources in the PJM Interconnection grid that includes Pennsylvania.

Background

Coal-fired power plants have been shut down due to competition with natural gas-fired plants to the point Pennsylvania now depends on natural gas for 60% of our electric generation. Other sources include 31% nuclear, 5% coal and 4% other, mostly renewables. Read more here.

PJM’s que for new electric generation includes almost all renewable energy and energy storage.

PJM has approved 38,000 MW of renewable electric generation and energy storage for connection to the electric grid, however many projects have not been built. Read more here.

On September 26, Utility Dive reported concerns by PJM that these projects are not being built for a variety of reasons including procuring equipment, local opposition and financing obstacles.

Last July, the PJM Interconnection auction for wholesale electricity generation capacity to be delivered in 2025-26 resulted in a 933% increase in electricity costs over 2024-25. Read more here.

The General Assembly has been searching for a solution to this issue since coal plants began to close as a result of competition with natural gas in the 2010s and President Obama first talked about a Clean Power Plan in 2014-15. Read more here.

And before Gov. Wolf issued an Executive Order in October 2019 proposing a cap-and-invest program to reduce carbon pollution from power plants and encourage renewable energy. Read more here.

Commissioner Comments

In response to questions about this issue, here are some of the related comments offered by Commissioners.

Solutions To Shortfall - All The Above

PUC Chair Stephen DeFrank explained, “We are going to be faced with this shortfall. And again, I don't think we're going to build our way out of it.

“We're not going to build our way out of it through transmission.

“We're not going to build our way out of it through generation. I don't think we can have it up and running quick enough.

“Put it in perspective, an average gas [power] plant is 800 megawatts. So we're talking, are we going to build 50 gas plants in the next five years?

“I mean that's really to put numbers, that's what we're talking about.”

“I think that what we're hearing now is supply chain issues.

“It typically was about three years for a combustion turbine, we're seeing those run about four to five.

“And as we have folks trying to build 50 plants at one time, I guarantee that's going to go out even further. It's about three to four years to get the turbine.”

“And that's why our capacity option is a three-year look ahead if that's how long it took to build that type of a unit.

“So I think that we're going to need an above all approach.

“I think that as we've heard everyone say, put as many watts on the grid as we possibly can.

“I think we are going to have to build out transmission infrastructure, electric transmission infrastructure in order to meet those needs.

“But then we're also going to have to look at the way we use power. Again, load shifting.

“I don't know that we're going to be able to power all these data centers evenly across the board.

“How can we shift and power one data center down while we're powering another one up?

“I think that we just have to look at how we manage the grid differently than we have for the last 20 years when we had a huge reserve margin and no growth.”

Need To Diversify Generation

Commission Vice-Chair Kimberly Barrow said, “Right now, where we are as an electric grid, I think we need every single megawatt that we can get online.

“And I understand the concern about having 24/7 baseload power. That's something that we learned during, for example, Winter Storm Elliott.

“If you have a system that is powered by mostly gas, when something happens to that fleet, you're going to have a lot of outages amongst one class of power generation.

“We need a diversity of power sources so, when performed well, other resources perform well. And what we need is that mix.

“And I think the science and the art is going to be in finding the right mix.

“But we can't put all of our eggs in one basket.

“Yes, we need more gas. Yes, we need nuclear to stay online, and possibly new nuclear. And I believe that that's what PRESS [Governor’s energy plan] is trying to get at. Just my opinion.

Proposed Plan Had No Impact On Markets

PUC Chair Stephen DeFrank said, in response to questions about the impact of the Governor’s “Lightning Energy Plan” called PRESS and PACER-- “So again, PRESS, PACER, RGGI, whatever we're calling it now that this version of it, RGGI is stopped. It's under a stay in the courts

“So, they don't have any real impact on the markets because they're not in place. There hasn't been any money changing hands. There hasn't been any credits being made.”

Need Consistent PJM Rules

PUC Chair Stephen DeFrank said, in response to a question about what is to blame for high electric generation costs--

“So when you talk about wholesale [electricity] costs, you have capacity costs and you have the actual cost of the electricity.

“That cost has been down, mostly driven by the low cost of natural gas in the Commonwealth. So the actual energy cost has gone down.

“If you're referring to the capacity cost [PJM’s auction], which was increased in the last auction tenfold-- went from $28 to $270.

“That's been driven by a number of things.

“It's been driven by increased demand, it's been driven by decreased supply. It's been driven by PGM tweaks and changes in the [PJM] rules of that capacity market and a lack of consistency.

“I think that if we get these down to a set of rules and we develop some consistency in that market, we will see that market start to perform how it should and send those proper signals.”

Click Here to watch a video of the hearing.

PUC Budget Testimony

The written testimony of PUC Chair DeFrank to the House Appropriations Committee included this statement on resource adequacy--

The Commission continues to monitor and address critical issues in the state’s electricity sector, ensuring that electricity remains reliable, competitive, and consumer friendly.

The Commission is actively engaged in assessing resource adequacy, supporting the continued development of Pennsylvania’s competitive electricity markets, and enforcing strict oversight of electric generation and natural gas suppliers to protect consumers from misleading or deceptive practices.

The issue of electric resource adequacy has gained increased attention following the July 2024 capacity auction conducted by PJM Interconnection (PJM) – the regional grid operator for Pennsylvania and much of the Mid-Atlantic and Midwest.

The auction resulted in a nearly tenfold increase in capacity pricing for the 12-month period beginning June 2025.

The primary drivers of these cost increases include--

-- Projected electric load growth, particularly from data centers supporting artificial intelligence (AI) applications, which could account for 16% of total electricity demand by 2039—up from 4% today.

-- Increased adoption of electric vehicles (EVs) and electrification of heating systems, adding to future demand growth.

-- The retirement of traditional generation units and the growing use of intermittent renewable energy resources, which require a balanced mix of capacity solutions to maintain reliability.

Recognizing the potential challenges posed by these developments, the PUC hosted a Technical Conference on Resource Adequacy. Participants included utilities, generators, consumer advocates, and other experts.

Key topics discussed included:

-- Whether utilities should play a more direct role in securing new generation resources.

-- The potential use of long-term power purchase agreements (PPAs) to support new generation development and grid stability.

-- The need for large-load users, such as data centers, to provide their own backup generation rather than relying solely on the grid.

-- The role of energy storage, demand response, and energy efficiency in balancing supply and demand.

-- Regulatory and policy barriers that may slow new genera on and transmission development, including lags in PJM’s process for interconnecting new genera on resources, local permitting challenges, environmental policies, and supply chain constraints.

Following the conference, the PUC received 30 sets of formal comments and is currently reviewing input from stakeholders to determine next steps.

The Commission remains committed to ensuring that Pennsylvania’s electric grid remains reliable and resilient in the face of an evolving market and technological landscape. [Read more here]

The Commission continues to closely monitor competitive market developments to ensure that Pennsylvania consumers benefit from fair pricing, transparency, and robust supplier competition.

Click Here for a copy of PUC Chair DeFrank’s budget testimony.

Resource Links:

-- PUC Invites Stakeholder Comments On The Issue Of The Adequacy Of Electricity Supplies In Pennsylvania [Background On Issue] [PaEN]

-- 30 Stakeholder Comments Received By PUC On Adequacy Of Electricity Supplies In Pennsylvania; Increasing Natural Gas Power Plant Reliability To 90-95% Would Mean No Imminent Capacity Problem [PaEN]

-- Senate DEP Budget Hearing Focuses On Permit Reviews; Governor’s Lightning Energy Plan; Bringing On More Baseload Power Generation; Firing ‘Intractable’ DEP Employees [PaEN]

-- Gov. Shapiro Reaches Agreement With PJM To Prevent Unnecessary Price Hikes And Save Consumers Over $21 Billion On Utility Bills [PaEN]

-- Gov. Shapiro Threatens To Pull Pennsylvania Out Of PJM If It Does Not Protect Consumers Against Soaring Power Prices [PaEN]

-- Gov. Shapiro Proposes ‘Lightning’ Energy Plan To Increase & Diversify Energy Generation; Reduce Climate Changing Pollution; Lower Energy Costs; Create Jobs [PaEN]

-- PA Senate Republican Leader: ‘Every Consumer Of Electricity In This Commonwealth Is Going To Pay More;’ ‘What You’re Going To Face Is Going To Be Really Unpleasant’ [PaEN]