Customer and environmental advocates are raising concerns about the record-setting prices in the latest PJM Interconnection LLC capacity auction, while blaming the problem on a lack of cleaner resources and the use of out-of-market arrangements.
The Maryland Office of People's Counsel and the Natural Resources Defense Council (NRDC) are two of the latest entities to flag the costly impact of the auction results on customer bills.
"PJM's failure to allow for new clean energy to come online and plan for more transmission has forced the bill onto ratepayers," NRDC advocate Claire Lang-Ree wrote in an Aug. 22 blog post.
The auction for PJM's 2025/2026 delivery year cleared at $269.92/MW-day for much of the grid operator's footprint, a nearly tenfold increase from $28.92/MW-day for the 2024/2025 auction, driven by tighter supply, higher demand and market rule changes, according to results posted July 30.
Certain transmission-constrained zones cleared even higher, at $466.35/MW-day for the Baltimore Gas and Electric Co. (BGE) zone and $444.26/MW-day for the Dominion Energy Virginia (DOM) zone.
"As with most markets, when supply falls, prices rise," Lang-Ree wrote. "With 26 GW of gas and coal resources now deemed to be unreliable and therefore not counted in its capacity market, the price of capacity in PJM spiked. Affordability, but not reliability, is now at risk."
The NRDC pointed to a report by S&P Global Commodity Insights energy analysts that showed PJM's updated accreditation process cut the contribution of gas and coal resources to reliability by 21% and 16%, respectively, and compressed the supply stack by 26 GW.
This change in capacity accreditation, known as effective load-carrying capability, was developed to better account for correlated outages in the wake of a severe weather event in December 2022 that nearly prompted rolling blackouts.
PJM originally designed this methodology to accurately capture the capacity contributions of variable renewable energy resources such as weather-dependent wind and solar, as well as battery storage and hybrid resources, as their systemwide penetration grows across the grid operator's mid-Atlantic footprint.
Waiting to connect
The NRDC also pointed to PJM's clogged interconnection queue as one of the main reasons behind the lofty clearing prices.
"This sticker shock is a direct result of delays in getting new energy online, together with the transmission to support it," Lang-Ree wrote. "Many of these resources would have absorbed and buffered the price increases by increasing supply."
PJM, which serves all or parts of 13 states and Washington, DC, shifted to a "first-ready, first-served" approach to clear more than 260,000 MW in proposed generating capacity in its interconnection queue by the end of 2026. More than 95% of those projects represent renewable energy, battery storage or a hybrid of both.
"Adding just 7 GW of new entry could have lowered the market clearing price from $269.92/MW-day to as low as $98, or by as much as 63%," the NRDC wrote.
PJM, however, has raised concerns that about 38,000 MW of resources have "already cleared PJM's interconnection queue but have not been built due to external challenges, including financing, supply chain and siting/permitting issues."
Reliability must-run impact
The NRDC and the Maryland Office of People's Counsel also take issue with PJM's reliability must-run (RMR) arrangements with Talen Energy Corp.'s Herbert A Wagner and Brandon Shores fossil-fueled power plants in Maryland.
PJM in January formally requested that Talen postpone the retirement of two Wagner oil- and gas-fired units by about three years because of reliability concerns.
Talen had notified PJM in October 2023 of its intent to retire three Wagner units and the Herbert A Wagner CT unit in Anne Arundel County, Md., on June 1, 2025. The units have a combined capacity of 841 MW, according to Talen.
PJM told Talen that a study of the transmission system showed the planned deactivation of Wagner units 3 and 4 "will adversely affect the reliability" of the electric grid absent transmission upgrades.
The nation's largest grid operator also requested that Talen's 1,273-MW coal-fired Brandon Shores power plant in Maryland stay online until system upgrades are complete.
While Brandon Shores is expected to provide RMR service until December 2028, it is possible that Wagner may need to operate beyond 2028, according to Maryland's consumer advocate.
The Office of People's Counsel retained Synapse Energy Economics to analyze the impacts of the capacity auction reforms and RMR arrangements on retail electric rates.
"We conducted a counterfactual analysis of clearing prices in PJM, and found that if Brandon Shores and Wagner RMR units had remained as supply-side resources in the capacity market, the RTO as a whole would have cleared at $163.46/MW-day," the firm wrote in its analysis.
Synapse noted that customers in the BGE transmission zone also are paying for "a substantial portion of the out-of-market RMR arrangement costs for Brandon Shores and Wagner."
"When considering both the capacity market impact and the RMR service arrangement costs together, total bills are likely to increase by 19[%] — an extra $21 on the average residential customer bill and $224 on the average commercial monthly bill," the consultant wrote. "Over the course of a year, that could result in residential electric customers paying an additional $247 annually, and commercial customers paying $2,685 of additional costs."
Maryland customers are expected to absorb these additional costs until at least December 2028.
The Synapse report and NRDC blog also each noted that PJM must move quickly to implement any cost-mitigation measures or capacity constraint solutions before the next capacity auction, set for December.
"Without rapid and significant improvements to the interconnection process in PJM, reliability issues, RMRs, and high capacity prices could continue escalating costs for Marylanders for years to come," Synapse wrote.
PJM should require the Brandon Shores and Wagner power plants, as well as any other units under similar arrangements, to bid into the capacity auction, according to the NRDC.
"If they did, customers in Maryland would have saved up to $18 per month, and the PJM region as a whole would have saved $5 billion," Lang-Ree wrote in the blog post. "PJM has the tools in its toolbox to bring down prices and ensure a reliable, clean supply of electricity for years to come. If it acts now, these price increases can just be a bump in the road to a more affordable, resilient grid."