Power auction results will indicate 2028 electricity cost trends

During a Monday press call organized by the Clean Power PA coalition, speakers identified data centers as the primary driver of rising electricity demand within PJM, the regional grid operator for 13 states and the District of Columbia. 

Demand is growing faster than new power plants and other resources are being connected to the grid, tightening the balance between supply and demand and contributing to higher capacity prices and reliability concerns. 

PJM’s capacity market pays power plants and other resources to commit to being available when electricity demand is highest. Those payments are separate from the cost of the electricity the resources produce, but capacity costs are ultimately passed along to customers through their electric bills. 

Patrick Cicero, a former Pennsylvania consumer advocate who is now of counsel with the Pennsylvania Utility Law Project, estimated that the most recent capacity-price increases have cost the average Pennsylvania residential customer an additional $220 to $320 annually. 

Across the state, Cicero said, Pennsylvania households paid approximately $1.2 billion more over the past 18 months than they otherwise would have.

“The overwhelming driver of that $1.2 billion is because of data center load growth,” Cicero said.  “We're talking $50, $60 a month for really high users. This is real dollars that are coming out of Pennsylvanians' pockets.”

The latest auction results will not appear on customer bills immediately, and the effect will vary by utility, electric supplier, and usage. It will establish capacity costs for the 2028-2029 delivery year. 

Robert Routh, Pennsylvania policy director for climate and energy at the Natural Resources Defense Council, predicted the auction would again produce a result near the price ceiling. 

“Without a crystal ball, it is safe to say we expect this auction to be more of the same in terms of the outcome and the clearing price,” Routh said. “Data center load growth is degrading grid reliability and will likely raise prices to the Governor Shapiro-negotiated cap once again.”

The price cap, first negotiated by Gov. Josh Shapiro and PJM, was extended for two additional auctions following approval by the Federal Energy Regulatory Commission and with support from all 13 PJM-state governors, and the White House National Energy Dominance Council and U.S. Department of Energy. It limits wholesale capacity prices to approximately $325 per megawatt-day. 

Routh said the ceiling has prevented costs from rising further, citing PJM estimates that it avoided nearly $13 billion in additional capacity costs across two auctions. 

Advocates described the cap as a temporary consumer protection rather than a solution to the underlying imbalance between growing demand and available power supplies. 

Elowyn Corby, senior Mid-Atlantic regional director for Vote Solar, said PJM’s problems are increasingly affecting state and local efforts to expand affordable energy resources. 

“With PJM experiencing such serious dysfunction, many of our efforts to build an affordable clean energy economy run the risk of washing up against its rocky cliffs,” Corby said. “While there is still a lot that states and communities can do to get around PJM, ignoring it is simply no longer an option.”

The speakers proposed several reforms, including a “reliability backstop” procurement that would require large data centers to support the development of new power generation, battery storage, or other resources needed to serve their demand. 

They also argued that large data centers should be required to bring their own capacity rather than having their projected electricity needs added to the broader market, raising prices for all customers. 

While policymakers would first need to define what qualifies as a large load, advocates estimated that treating data centers separately could save consumers nearly $10 billion annually. 

They also called for greater scrutiny of electricity demand forecasts to reduce double counting and prevent speculative data center projects that may never be built from inflating projections and driving unnecessary grid investments. 

Not everyone agrees that the capacity auction cap has benefited Pennsylvania. Senate President Pro Tempore Kim Ward recently argued that the uniform PJM-wide limit disadvantages Pennsylvania, a major electricity-producing and exporting state, by shifting costs associated with shortages and policy decisions elsewhere in the region onto Pennsylvania ratepayers.

Other states, Ward said, have favored alternative energy sources at the expense of fossil fuels such as natural gas and coal. 

“So our folks in Pennsylvania, even though we are the largest exporter of this energy, are now paying more, so that Maryland and Virginia can keep following their green energy dreams," Ward said.