PJM Capacity Auction Costs Hiking PA Rates
Governor Shapiro and PJM are facing off once again over rising electric rates. In 2024, PJM’s capacity auction rose over seven times their usual amount, causing electric rates to jump. While the PA Gov sued PJM over its capacity auction method, the last auction still sent prices higher. While a FERC approved price collar kept rates lower, Gov. Shapiro is now fighting to extend it. And the results could affect your electricity rates!
Understanding the PJM Capacity Auction
Part of PJM’s job is to ensure that there’s enough electricity on hand to meet demand. PJM uses capacity auctions to offer electric generators an amount per MW/day to secure enough electricity for the grid. By using an auction, they increase the offer until they line up enough energy supply. But rising demand and a smaller supply have led to higher prices for both utilities and electric retail suppliers. This is why Gov Shapiro proposed the price collar.
Data Centers, PJM Policies Driving Up Prices
Tight supply and rising electricity demand from data centers has driven the record-setting price spikes during these last two auctions. Data center growth in PA is huge right now. But along with it comes a power drain. By 2030, PJM expects 32 gigawatts of new demand on its system. Of that, 30 gigawatts will comes from data centers.
On top of this, PJM has been shutting down older plants faster than they will approve new ones. They’re now promising to fast track certain power projects. But it will take time for PJM to comply with FERC on their interconnection process. While PJM drafted a policy proposal to tackle some of these issues, little else is seems changed. As a result, the aging infrastructure and existing policies may make for rising rates this summer.
PA Protecting Consumers
Thankfully PA, and other states on the PJM grid, are fighting back. Governor Josh Shapiro submitted a formal response to PJM, urging them to extend the price collar. In that press release, he took a strong stance. “Asking families and businesses to pay uncapped, skyrocketing prices when new power cannot realistically be built in time is unjust and unreasonable.” In addition, Gov. Shapiro is tackling utility profits and junk fees to help lower consumer costs.
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