What you need to know about PJM Capacity Price Increase?

PJM’s capacity market auction for the 2025/2026 delivery year cleared at a record high price of $269.92/MW-day, up from $28.92/MW-day in the previous auction. Here’s what you need to know and what your business can do to mitigate risk.

What is PJM?

PJM is a regional transmission organization (RTO) that maintains reliability and manages the electricity grid and wholesale electricity market for parts of 13 states and Washington, D.C., serving over 65 million people. 

How are capacity rates determined?

Rates are set annually by RTOs like PJM, based on your organization’s Peak Load Contribution (PLC), which reflects your energy usage during peak hours. In many PJM utilities, the PLC is calculated from your average demand during the system’s five highest demand hours. Capacity prices, which can vary yearly, may account for up to 1/3 of your total electricity costs.

Energy Resource Guide

Record Increases

PJM’s capacity charges are determined through an annual auction process to secure capacity three years in advance. The capacity auction for the 2025/2026 delivery period resulted in a record high price of $269.62/MW-day, up from $28.92/MW-day in the previous auction.

This is an 833% increase.

What is driving higher prices?

PJM’s capacity auctions are designed to assure grid stability and future availability of energy resources by encouraging investment in generation infrastructure. For 2025/26 auction, three factors drove the prices higher:

You Can’t Avoid Higher Rates

Most businesses in the PJM power grid can expect their commercial energy bills to increase between 29% to 40% starting in June 2025. Unfortunately, these fees are non-negotiable, even within a deregulated energy market.

  • Decreased Supply

    The auction saw a reduction in supply offers, primarily due to power plant and generation retirements. Approximately 6,600 MW of generation have retired or signaled intent to retire compared to the previous auction.

  • Increased Demand

    The peak load forecast for the 2025/2026 Delivery Year increased to 153,883 MW, up from 150,640 MW for the 2024/2025 auction.

  • Market Reforms

    FERC-approved market reforms have improved reliability risk modeling for extreme weather and can more accurately value each resource’s contribution to reliability, further tightening the supply/demand balance.

solutions

What you can do to protect your business.

AEP Energy believes in transparency. Our Sales Representatives keep you informed about market conditions and price changes to manage expectations. We offer several solutions to manage and protect your business from rising energy costs.

  • Fixed-Price Contracts

    Our fixed-priced contracts provide price stability and predictability so you can budget effectively.

  • Gas gauge and gears

    Demand Management

    Utilize our demand management programs to shift or reduce energy usage during peak times or receive payments for curtailing usage during specific periods.

  • Paper checklist with dollar sign in magnifying glass

    Energy Efficiency Measures

    Utilize AEP Energy’s energy audits to identify and implement energy efficiency measures that can significantly impact your budget.

  • Onsite Distributed Generation

    Explore AEP Energy’s onsite solutions, such as solar panels or battery storage, to reduce reliance on the grid and ensure continuous business operations.

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