Once followed mainly by industry insiders, PJM’s capacity auction is now receiving broader attention from policymakers and consumers alike because of recent spikes in the cost of electricity bought through the auction.
The cause of these spikes is the rapidly increasing demand for electricity driven by A.I. data center development.
PJM said-- “New data center facilities and expansions of existing sites can be developed quickly, up to two to three times faster than many of the electricity generation technologies that are necessary to serve them and allow PJM to maintain the reliability customers expect.
“The tightening balance of supply versus demand has contributed to higher capacity prices and raised concerns about the long-term ability of the system to deliver reliable service on a 24/7 basis.”
Price Cap
“In coordination with the governors of all 13 PJM states, PJM implemented a price cap and floor for the previous two auctions and extended those parameters to this auction and the next one in December 2026 to help limit volatility for consumers and investors alike.”
“Prices are capped at approximately $325/MW-day, with a floor of $175/MW-day.
“In practical terms, that means prices are unlikely to change significantly from year to year under the current structure.”
“While the price cap and floor may reduce volatility, they do not solve the underlying supply-demand imbalance. Addressing that challenge requires either bringing more resources onto the system or moderating the pace of demand growth.”
Previous Auctions
The last two PJM auctions saw prices come in right at the $329/MW day cap, record high prices in their own right. [Read more here.]
Without the cap, PJM estimated prices would have been $389/MW-day in July 2025 and $529/MW-day in December, saving ratepayers hundreds of millions of dollars in avoided costs.
But the cap is still significantly higher than PJM's previous auctions-- $28.92/MW-day in February 2023 and $269.92/MW/day in July 2024.
Capacity auction prices have been and will continue to be driven to record highs by extraordinary power demands from existing and proposed A.I. data centers in Pennsylvania and several other PJM states for the foreseeable future, according to PJM.
Click Here for the PJM auction announcement.
The PJM Interconnection coordinates the wholesale electricity grid and markets for all or parts of 13 states—Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, and West Virginia—plus the District of Columbia.
Resource Link:
-- Sen. Yaw Urges FERC To Allow PJM To Keep Charging Pennsylvania Ratepayers Record High Capacity Auction Prices For Power, But Charge Other States Even More [PaEN]
Related Articles This Week:
-- Hundreds Of Residents From Communities Across PA Dealing With A.I. Data Center Development Rally At State Capitol To Support Bipartisan Legislation To Enact A 3-Year A.I. Data Center Moratorium [PaEN]
-- PA House Passed 20 A.I. Data Center Bills, Many By Lopsided Bipartisan Votes; PA Senate Acts On Tax Changes [PaEN]
-- PA House Passes Bill Giving Individual Municipalities Authority To Pause Consideration Of A.I. Data Center Proposals For 6 Months [PaEN]
-- PA House Nearly Unanimously Passes Bill To Repeal State Data Center Computer Equipment Sales Tax Exemption [PaEN]
-- PA House Passes Bill Limiting State Data Center Sales Tax Exemption To Those Developers Following Gov. Shapiro's Responsible Infrastructure Development Standards [PaEN]
-- PJM Interconnection Holds Next Generation Capacity Auction June 30, Results To Be Announced July 14 [PaEN]
-- PJM Adds New Emergency Procedures To Deal With Strained Grid: A Capacity Advisory; Directive For Data Centers To Use Backup Generators [PaEN]
-- Lt. Gov. Davis Brings Together Utility Industry Experts To Highlight Solutions To Rising Energy Costs
-- Senate Democratic Policy Committee Holds Hearing On Solutions To Lower Consumer Electric Bills
NewsClips:
-- Pittsburgh Business Times: Environmental Groups Push PA Lawmakers To Pass HB 1834 To Protect Ratepayers, Regulate A.I. Data Centers
-- PA Capital-Star: PA House Passes Bill With $1.7 Billion Tax Cut On Electricity, Reins In Public Utility Company Profits [Electric, Natural Gas, Water, Wastewater] By Setting New Rate Formula
-- House Unanimously Passed Bill To Base All Electric, Natural Gas, Water And Wastewater Rates On A Market-Based Return On Equity To Address Increasing Utility Bills [House Bill 2224]
-- The Citizens’ Voice: Project Hazelnut A.I. Data Center Offers $10,000 To Hazle Twp. Households As An Incentive To Approve The Plan [4,505 Households In Twp. - $45 Million]
-- PennLive: Amid Growing Voter Outcry, A.I. Data Centers Have Emerged As An Election Issue For PA Lawmakers
-- Republican Herald: Mount Carmel Area Residents Concerned About Data Centers Launch New Grassroots Group Aimed At Giving Coal Region Communities A Stronger Voice
-- PennLive: Western PA Coal Towns Are Ground Zero For A.I. Data Centers: ‘A Boom Coming’
-- Pittsburgh Business Times: How A.I. Data Centers Lost The PR War And What It Means For Business
-- AP: A.I. Is An Energy And Water Hog, Here’s What You Can Do To Counter That
-- Utility Dive: North American Electric Reliability Corp: Deployable Generation Reserves Shrinking As Coal, Gas-Fired Power Plants Forced Outage Rates Rise
-- Utility Dive: US DOE Orders Keeping Power Plants Open Beyond Their Closure Dates Are Incurring $550 Million In Added Costs, What Are The Benefits?
-- Wall Street Journal: A.I. Data Center Boom Sparking Third Wave Of Inflation - Cost Of Computer Chips - Following Energy, Labor & Constructions Costs
[Posted: June 26, 2026] PA Environment Digest
No comments :
Post a Comment