The report "frankly assesses" the current industry landscape of high prices, burgeoning electricity demand and reluctant investors, and catalogues the foundational decisions that will be required of industry and government to meet those challenges for the long term.
“The Board asked PJM to examine whether the foundational assumptions of the market remain valid – and if not, what a valid set of assumptions would require. The paper that follows is an honest attempt at that examination,” said President and CEO David Mills stated in a forward to the paper.
"The current situation is not tenable, Mills noted, and PJM and stakeholders have limited time to act."
PJM said-- "the landscape around PJM’s capacity market, or Reliability Pricing Model (RPM), has fundamentally changed. Where once electricity demand grew slowly and predictably, today data centers can be built much faster than generation can be built to serve them."
"Building new generation is more expensive and riskier than it used to be: Capital costs have risen sharply, construction timelines have more than doubled, and state and federal policy has whipsawed.”
The report says-- Combined cycle natural gas projects slated for completion in 2026–2027 were reported at capital costs of $1,100–$1,400/kW.
By contrast, CC projects with 2028–2031 commercial operation dates are routinely reporting costs of $2,000/kW or more, with several PJM-specific projects in the data set in the range of $2,100–$2,300/kW.
The proposed Homer City A.I. data center campus power plant has a $2,222/kW cost.
Gas turbine and transformer equipment scarcity are contributing to cost increases and power plant delays.
"Many investors now require long-term revenue certainty before committing capital to new projects to offset the increased risks.
"That leaves PJM’s capacity market in a credibility trap – high prices designed to signal the need for investment put pressure on consumers who are unprotected from market volatility; this triggers government intervention to protect consumers, which undermines the credibility of those same prices and fails to incentivize new investment.
"PJM believes that markets provide the best opportunity to address this challenge cost-effectively.
The paper does not recommend a specific path, but rather outlines three general frameworks to start the conversation, based on the concept of shared reliability that has traditionally guided the markets:
-- One path would preserve the shared responsibility for one level of reliability for all, protecting consumers by requiring most electricity demand to be covered through long-term forward commitments that shield consumers from price spikes and support needed investment.
-- A second would accept that reliability can no longer be rationed equally and differentiate reliability standards across load, geography or customer class, prioritizing those that contribute to or value reliability most.
-- A third path would emphasize the Energy and Ancillary Services markets for investment price signals, supported by long-term energy contracting, with the capacity market remaining as a reduced backstop.
“The choices embedded in these paths involve genuine trade-offs, and those trade-offs affect different stakeholders uniquely,” the paper states. “The goal of this paper is to ensure those trade-offs are visible and that the region’s decision-making process is informed by a clear understanding of what each path requires and what it delivers.”
Click Here for a copy of the paper.
Click Here for a copy of the PJM announcement.
The PJM Interconnection operates the electric grid in 13 states and the District of Columbia and includes Pennsylvania.
NewsClip:
-- PA Capital-Star: Citing ‘Unsustainable Stress’ From Price Volatility, PJM Grid Operator Lays Out Reform Options
Related Articles This Week:
-- PA House Passes Bills To Establish Framework For Developing Clean, Safe Geothermal Energy, Advanced Transmission Line Technology, Retooling PA Energy Financing Authority [PaEN]
-- PA House Energy Committee Reports Out Bills To Authorize Virtual Power Plants, Address Connecting New Generation Quickly To Improve Grid Reliability [PaEN]
-- Environmental Advocates Urge Lawmakers To Pass Bills Giving PUC Authority To Regulate Data Centers, Prohibit Nondisclosure Agreements, Promote Clean Energy To Reduce Energy Costs [PaEN]
-- Guest Essay: Every Community Evaluating An A.I. Data Center Proposal Should Ask - What Financial Instrument Is Posted Before Construction That Guarantees The Site Will Be Remediated If The Facility Becomes Obsolete, Is Abandoned Or Closes? - By PA Data Center Accountability, Carbon County [PaEN]
-- Sen. Laughlin Introduces Resolution Urging PA To Enter Into Multistate Compacts To Oversee Policies, Procedures For Planning, Siting, Construction, Operation Of Interstate Electric Transmission Lines [PaEN]
-- PUC Announces 2 June 30 Hearings On Proposed PPL Utilities Transmission Line Projects In Hazle Twp., Luzerne County Serving Project Hazelnut A.I. Data Centers [PaEN]
-- Public Utility Commission Sets July 10 Telephonic Hearing On PPL Condemnation Of 30 Properties For The Sugarloaf 500/230KV Transmission Line In Luzerne County To Serve Data Centers [PaEN]
-- PA Solar Center: Learn How To Advocate For REAL Energy Independence For PA During Online Workshops June 8, 15 [PaEN]
NewsClips:
-- Spotlight PA: Shapiro Demands A Stop To ‘Excessive’ Electric, Natural Gas, Water Utility Rate Increases, But Has Little Authority To Force Change
-- LancasterOnline: PPL Electric Default Service Customers To See 1.5% Increase In What They Pay For Electricity They Use Starting June 1
-- TribLive Editorial: Rising Electric Bills Leave Pennsylvanians Powerless
-- Pottstown Mercury: Details Emerge About Threats Related To Proposed Twp. Limerick A.I. Data Center Project In Montgomery County; Some Threats Read At Tuesday Meeting https://tinyurl.com/mr4yxm7s [PDF of Article]
-- PA Capital-Star: PJM Grid Manager Says Developers Are Proposing 220 GW Of New Power Projects [Decisions On Which Go Ahead Will Not Be Made Until Feb. 2028, Then They Have To Be Financed, Sited, Built]
-- Utility Dive: PA House Unanimously Passes Bill To Require Utilities To Incorporate Review Of Advanced Transmission Technology In Transmission Line Proposals
-- Utility Dive: North American Electric Reliability Corp. Issues Level 3 Alert, Mandates Action To Address Sudden A.I. Data Center Load Losses
-- Utility Dive: American Electric Power Eyes Exit From PJM, SPP Over Slow Connection Of New Generation In Face Of A.I. Data Center Demand [AEP operates in Indiana, Kentucky, Michigan, Ohio, Virginia, WV In PJM]
[Posted: May 6, 2026] PA Environment Digest
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