On July 17, 2024, PJM held its Capacity Auction for Planning year 2025/26. The results were published on July 30, 2024, and the rates are significantly higher than the previous year. They increased by 816% for most of PJM’s footprint. The majority of PJM’s current Capacity rate is $29.50 per MW-year for 24/25, and the rate increased to $270.35 per MW-year for 25/26. The PJM Planning year runs from June 1 to May 31.
The increase in rates was due to increased projected load growth in PJM, decreased supply offers into the auction due to power plant generator retirements, and FERC changes to risk modeling for reserve margins. PJM CEO Manu Asthtana stated, “The significantly higher prices in this auction confirm our supply/demand balance is tightening across the RTO. The market is sending a price signal that should incent investment in resources.”
In the past year alone, supply declined by 6.6 GW of generation retiring or giving notice of intent to deactivate. With supply declining, demand has been increasing and is projected to increase more in the next few years due to new data centers being built across PJM’s footprint.
What does this mean for customers come June 2025? For an 80% Load Factor customer, the increase in Capacity rates represents about a $0.012 per kWh increase in cost. This translates into about $12,000 annually for a customer that uses 1,000,000 kWh per year.
PJM is a regional transmission organization (RTO) that coordinates the movement of wholesale electricity in all or parts of 13 states and the District of Columbia.
So, regardless of who is who is in office in Jan, 21, this price rise has already been baked into the cake. As noted above, the problem has been created by the withdrawal of energy sources, mostly fossil fuel plants which the Democrats and the EPA have been trying (rather successfully) to kill for years (Thanks, Brandon!), and the increase in demand from data centers in the region.
Maybe we need a law that data centers need to produce their own power. Preferably using unicorn farts.
I don't quite what this will mean for us and other residential electrical connections., but our local electricity provider, Southern Maryland Electric Co-op, buys power, presumably from these providers, so it looks like a huge rate increase is on the way.
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