PA Environment Digest Blog: PJM Electricity Auction Prices Again At Cap Imposed By Gov. Shapiro’s Lawsuit Settlement, Without It Prices Would Be 59% Higher Driven By A.I. Data Center Demand; Grid Reliability Now Questioned

On December 17, the PJM Interconnection announced the capacity electricity auction prices again hit the $333 MW/day market cap imposed by Gov. Shapiro’s lawsuit settlement for securing 134,479 MW of electric generation for delivery in 2027-28.

Without the cap, the price would have been at least 58.8% higher at $529 MW/day driving electricity bills even higher.

Electricity demand has surged driven primarily by A.I. data centers, while generators have failed to bring new energy resources online fast enough.

As a result, capacity prices have skyrocketed.

PJM’s 2025–26 auction, held in July 2024, resulted in costs of $14.7 billion, an increase of more than 800 percent from the prior year.

The subsequent auction, held in July 2025, drove costs even higher — reaching $16.1 billion.

This December auction had a clearing price total of $16.4 billion.

"This auction leaves no doubt that data centers’ demand for electricity continues to far outstrip new supply, and the solution will require concerted action involving PJM, its stakeholders, state and federal partners, and the data center industry itself,” said Stu Bresler, Executive Vice President – Market Services and Strategy, who becomes chief operating officer on Jan. 7.

Gov. Shapiro said in a statement-- “I sued PJM because it is unacceptable for them to do nothing as consumers pay sky-high utility bills while getting nothing in return.

“My Administration has once again stopped billions of dollars in unnecessary and unjustified energy price hikes from being passed on to families and businesses.

“ PJM needs real reform and they are running out of time to protect consumers from their inaction.

“My Administration will continue to build more energy generation right here in the Commonwealth and push PJM to fix its broken process so we can lower costs, strengthen reliability, and keep more money in the pockets of Pennsylvanians.”

This is the last auction subject to the market cap settlement agreement.

On December 3, Gov. Shapiro and five other governors in the PJM service territory wrote to the PJM Board urging them to immediately extend the market price cap agreement for one further auction to be held in June 2026 to allow time for additional reforms to be adopted. Read more here.

Results Do Not Meet Reliability Standard

PJM said the capacity of the resources procured in the auction, plus Fixed Resource Required resources, is short of PJM’s reliability requirement by 6,623 MW, meaning that the committed supply is less than what would be required to meet the one-event-in-10-year reliability standard of a 20% reserve margin.

This does not necessarily mean, however, that the PJM system will be unable to serve load reliability in the delivery year.

PJM continues to hold a reserve margin of 14.8%, and there are several mitigating factors that could improve the reliability picture for the system in the 2027/2028 Delivery Year.

5,100 MW Of 5,250 MW Of New Demand Is Data Centers

PJM said the forecast peak load for the 2027/2028 Delivery Year is approximately 5,250 MW higher than the forecast used for the 2026/2027 capacity auction.

Nearly 5,100 MW of that increase is attributable to data center demand.

Energy Mix

The cleared resource mix in this auction includes: 43% natural gas, 21% nuclear, 20% coal, 5% demand response, 4% hydro, 2% wind, 2% oil and 1% solar, according to PJM.

The auction cleared 774 MW of new generation and generation uprates.

The total amount of supply in the PJM service area increased from 196,650 MW to 200,994 MW, or an increase in the total amount of supply by 4,344 MW installed capacity

Click Here for the PJM announcement.

Reactions

PUC Commissioner Kathryn Zerfuss said in another context-- “So we all know that we have many challenges as it relates to energy supply and demand, and the gap between supply and demand is just growing more and more every day.

“We totally maintain that we have to take advantage of every single molecule and electron we can from all energy sources, whether it's solar, wind, for our electric grid.” Read more here.

John Quigley, Kleinman Center For Energy Policy, said-- “This is the third consecutive PJM capacity auction that has resulted in record-high costs, which will further raise electricity prices for consumers.

“Plus, the auction didn't secure enough supply to meet projected demand. That will require additional procurement that will push costs even higher.

“Almost all the projected increase in demand that is driving this result comes from data centers.

“PJM has failed to require that these data centers pay their own costs and is forcing consumers to subsidize them. That must change - fast. The need for reform of PJM is urgent.”

Tom Rutigliano, Natural Resources Defense Council, said "Summer 2027 will be the first time in PJM’s history it expects to not have enough power to reliably meet demand because of new data center forecasts and the ongoing risk of fossil fuel generators failing during winter storms.

"Data centers are applying to connect to the grid much faster than the grid can keep up. Right now, PJM and its member utilities are promising power they simply don’t have.

“Most troubling is that there was only 956 MW of new supply, even though this was the third year of very high prices. That’s less than a 1% increase in supply.

"Delays in building transmission, supply chain issues, barriers to siting new renewables, and PJM’s interconnection queue have combined to leave the region locked up and simply unable to build power plants. We’re throwing money in a hole right now.

“PJM must take action to protect the public from cost and reliability impacts by requiring new data centers that want to connect to the grid bring their own capacity.

"Otherwise, electricity bills will continue to rise and reliability will suffer. Worse, nearly all of the billions of dollars that customers will be charged will go to existing power plants, not to new supply and transmission infrastructure PJM desperately needs.”

Andy Tubbs, President and CEO of the Energy Association Of Pennsylvania [Electric, Natural Gas Distribution Utilities], said-- “For three consecutive auctions, capacity prices have skyrocketed, with the latest resulting in $16.4 billion in payments to existing generators.

“Yet even at these record-level prices, the auction fell short of PJM’s reliability requirement and added minimal new generation.

“Customers are paying more, but the market is still failing to deliver enough new supply to keep pace with growing demand.

“While some are raising concerns about new projects that will require energy, Pennsylvania’s economic growth is already driving record demand and stretching supplies to the limit.

“We cannot allow the lack of new generation to threaten reliability, drive up monthly costs for families and businesses, and squander economic opportunities.

“Make no mistake: Without enhanced procurement and practical tools to bring new generation online, Pennsylvania runs the risk of facing the same affordability and reliability challenges already hitting customers in New Jersey and Maryland.”

The Reliable Grid Project issued this statement--

“Developers are literally waiting in line to build the energy projects states need, but PJM is really struggling to get this new supply connected to the grid quickly enough,” said Jon Gordon, Director, Advanced Energy United. “Reforms are in the works, but don’t go far enough, and in the meantime, some energy projects have been languishing in the PJM queue for four or five years.”

Nikhil Kumar, Program Director at GridLab, warned that these factors are creating a "perfect storm" of increased demand and limited supply, leading to higher costs for consumers and potential reliability risks.

“Data centers are being built at a pace that far outstrips the ability of the system to balance supply and demand,” said Clara Summers, Consumers for a Better Grid Campaign Manager, Citizens Utility Board of Illinois (CUB). “This auction result underscores the urgent need for reforms to ensure affordability and reliability across PJM.”

“While the price cap has provided short-term relief, it’s clear that PJM’s interconnection process is broken,” said Kumar. “Texas has demonstrated that adding energy resources like solar, wind, and batteries can significantly reduce grid risks and costs. PJM must act quickly to implement reforms and bring energy projects online to address the growing demand.”

The Clean Power PA Coalition said-- “The latest PJM capacity auction signals still more electric bill increases ahead for millions of Pennsylvanians.

“Even with Governor Shapiro’s effective intervention to cap PJM auction prices, electric bills will increase yet again with this auction.

“This will come after most Pennsylvanians were hit with annual electric bill increases of more than $100 this past year, with price hikes ranging from 12% to 27%.

“What’s worse, those higher prices don’t necessarily mean there will be enough capacity to meet demand during periods of extreme weather during 2027-28, which could increase the risk of blackouts.

“The backlogged PJM process to approve new energy sources to the grid, especially many backlogged cheap, clean energy projects awaiting approval, means that PJM is not keeping up with the rapidly growing demand for electricity, driven largely by huge data centers.

“This failure to bring new energy online quickly enough, combined with PJM’s outmoded design for purchasing energy and its failure to build out more electric transmission, is driving up prices for all of us.

“The auction price cap that Governor Shapiro successfully negotiated with PJM a year ago was intended to give PJM time to institute long-term solutions.

“Over that period, PJM has accomplished little to address the underlying problems that are driving up prices. Unless extended, the next auction will take place this summer without adequate cost protections for electric bill customers.

“PJM must act with urgency to put an end to these outrageous electric bill hikes. For starters, it must remove barriers to cheap, clean, and reliable clean energy by quickly clearing its huge backlog of new energy projects waiting to connect to the grid.

“It must continue reforming its process for purchasing energy to ensure that people are not overpaying for their electricity.

“Finally, it must improve its transmission planning to more quickly build out more long-range transmission lines.”

NewsClips:

-- WHYY - Sophia Schmidt: PA, NJ, DE Could See Increased Risk Of Power Outages Due To PJM Supply And Demand Crunch On Regional Grid

-- Bloomberg: Pressure Mounts To Fix PJM Grid As Electricity Costs Hit New Highs

-- Reuters: Prices In PJM Power Auction Hit New Record, Signaling Higher Utility Bills Ahead

-- Utility Dive: PJM Capacity Prices Hit Record High As Grid Operator Falls Short Of Reliability Target; 6.6 GW Shortfall Could Trigger Reliability Backstop Auction

Resource Links - Energy Affordability:

-- PUC: Most PA Electric Utility Consumers To See 3.7% To 10.6% Increase In Electricity Prices During The Next 3 Months Starting Dec. 1 [PaEN]

-- Morning Call - Elizabeth Deornellas: How A.I. Data Centers Are Driving Up The Cost Of Electricity And What Grid Operators Can Do [PDF of Article]

-- Scranton Times - Chris Kelly Opinion: PPL Proposed 7% Rate Hike A.I. Data Center Driven [PDF of Article]

-- PA Capital-Star: Energy Market Watchers See Electric Bills In PA, Other States Rising As A.I. Data Center Demand Continues