Newswire — Power bills for about a fifth of Americans are expected to continue to rise after the largest U.S. grid operator, PJM Interconnection, reported fresh record-high capacity prices on Wednesday that reflected electricity demand by data centers overtaking supplies.
The expansion of Big Tech’s data centers has driven up so-called capacity prices in PJM by about 1,000% over a roughly two-year period, intensifying energy affordability problens for those living and working in the 13-state region covered by the grid operator.
Prices reached $333.44 a megawatt-day in the latest PJM capacity auction.
“This auction leaves no doubt that data centers’ demand for electricity continues to far outstrip new supply, and the solution will require concerted action involving PJM, its stakeholders, state and federal partners, and the data center industry itself,” said Stu Bresler, who becomes PJM’s chief operating officer next month.
Rising costs in PJM have hit everyday power bills in the Mid-Atlantic and Midwest U.S. states in the grid’s territory, with some areas seeing a more than 20% jump in utility bills starting from last summer.
Capacity prices make up a portion of utility bills, while other spending on power lines and services and the cost of fuel, such as natural gas, also contribute to the overall cost.
PJM, which operates the grid covering the largest amount of energy-intensive data centers in the world, holds auctions to determine the prices that energy companies will be paid to guarantee they run their power plants when called upon.
On-call generators in PJM’s capacity market are meant to guard against disruptions like blackouts during times when power demand spikes, and the high prices are aimed at encouraging developers to build more supply.
More supply, however, is not coming on fast enough. The available supply secured in the latest auction reached 134,479 megawatts. That was about 6,600 megawatts, or enough to power nearly 5 million homes, short of PJM’s reliability requirement, PJM officials said.
Higher consumer costs led a group of PJM-area governors, including Pennsylvania Governor Josh Shapiro, to negotiate a price ceiling and floor. That price ceiling took effect during the last auction, in July, and extended through the latest bidding round.
Shapiro and others are now calling for the price limit to be extended to future auctions.
“Reforms must be in place in time to protect Pennsylvania ratepayers before the next (auction),” Shapiro said in a filing this week with the Federal Energy Regulatory Commission.
MORE AUCTIONS
PJM once held its auctions three years out from the time the prices took effect to give power companies time to plan for new developments and to budget ahead of time. With regulatory delays affecting the power grid operator in recent years, capacity auctions have begun to take place less than a year out, which power companies say have slowed the pace of new developments.
PJM is now holding catch-up auctions as a way to get back to its three-year-out program. The prices released on Wednesday will take effect for the year beginning in June 2027.
In the meantime, existing power plant owners in PJM are expected to see windfalls from the recent capacity prices. Independent power producer Talen Energy said on Wednesday it expected to land more than $1 billion in capacity revenues for the 2027-2028 planning year.
Shares of Talen were up 3.7% after the market closed, while other PJM-region power producers Constellation Energy and Vistra were also higher by 2.7% and 1.6%, respectively.
Reporting by Laila Kearney in New York, additional reporting by Varun Sahay; Editing by Aurora Ellis and Nia Williams – Reuters
