PJM Capacity and Reliability under Rising Large-Load Pressure

PJM's capacity auction for the 2025/2026 delivery year, held in July, was the clearest price signal any U.S. grid operator has sent about the gap between new demand and firm supply. The clearing price for most of the footprint was $269.92 per megawatt-day, against $28.92 a year earlier. Two zones cleared at their caps: Baltimore Gas and Electric at $466.35 and Dominion at $444.26. PJM's auction report puts the total cost to load at $14.7 billion, compared with $2.2 billion for 2024/2025.

On our arithmetic the RTO price rose by a factor of 9.3 and the total bill by a factor of 6.7. The reserve margin, including utilities that self-supply under the fixed resource requirement, came in at 18.5 percent against a target of 17.8 percent. The report also records that the RTO as a whole failed PJM's three-pivotal-supplier test, so market power mitigation was applied to all existing generation offers. We think the high price is doing its job and should not be capped away in response to the political reaction. Consumers in Maryland and Virginia will see this auction in their bills from June 2025, which leaves state commissions less than a year to explain it.