PJM Auction Foreshadows the Future of Energy Prices
PJM’s latest capacity auction cleared at the price cap again. Although capacity costs are expected to stay roughly flat from June 2026 through May 2028, the trend of rising capacity prices signals growing strain on the grid. PJM Interconnection serves roughly 65 million customers across 13 states, meaning changes in capacity pricing can ripple across millions of energy bills. So what does the increase in capacity costs mean for large energy users and how can companies combat higher utility costs?
The Auction Hit the Price Cap - Here’s what that Means
The auction for the 2026-2027 year came in at a hefty $333.44/MW-day price cap. The price spike from this capacity auction could lead to energy bills rising from 1.5 to 5%. While capacity is only one component of a total energy bill, a spike of this magnitude can still translate into meaningful cost increases for large energy users.
Some areas in PJM have already seen a 20% spike in utility bills since last summer due to the increased demand of energy hungry data centers, which have driven up capacity prices by approximately 1,000% over roughly two years.
These high prices could have been even higher, however. A temporary price cap was established in an agreement with Pennsylvania Gov. Josh Shapiro. This price cap was applied to the capacity auction beginning in April 2025, in an effort to keep prices from skyrocketing.
Capacity Procurement Falls Short of Reliability Target
Despite high demand, there has been almost no new generation and PJM fell 5% short of its reliability target. In response, PJM might have to resort to backstop procurement if demand continues to increase without reliable supply. Although backstop procurement would prevent disruptions to the grid, emergency solutions are often the most costly. In many cases, the costs of these backstop procurements are ultimately passed through to customers, depending on how their contracts are structured.
Unfortunately, higher capacity costs are a reality in the current energy market. This capacity auction was the last year the temporary price cap was in place, although some experts believe it will get extended to try and help alleviate the financial burden for customers. PJM is also expected to release a new load forecast in January that could be much lower and could reduce the shortfall, but there is no guarantee. While these developments could provide some relief, they reinforce how uncertain capacity costs have become, and why proactive planning matters.
What This Means for Today’s Energy Purchaser
Rising capacity prices can feel like a threat to your energy budget, however, with the right strategy customers can take control of their spend. With increased price volatility, “set it and forget it” energy pricing becomes a risk that can have significant financial impact. A strategy built around modeling multiple outcomes, not just today’s price, helps energy buyers maintain control in uncertain markets.
Flat capacity prices today don’t guarantee predictable costs tomorrow, which is why seeking recommendations from knowledgeable energy experts can help you protect your bottom line. Energy CX can help you find an energy strategy that helps give your business control over energy spend. To find out more, book a meeting with us today. We can’t drive down the cost of capacity, but we can help you navigate volatility and manage risk.
