PJM Capacity Prices Just Hit a Record High — Here’s What Your Business Can Do About It

Capacity charges are a critical piece of your electricity bill in markets like the PJM Interconnection, a regional transmission organization that manages the electric grid and wholesale electricity market for much of the Northeast and Midwest. These fees aren't simply about the energy you consume; they’re like a reservation charge, guaranteeing enough power generation will be available when the grid faces its highest demand. In other words, you’re paying to ensure grid reliability during peak times, not just for energy used.

Understanding capacity charges helps clarify why recent trends have major implications for your energy costs. As the PJM region balances growing electricity demand with the retirement of power plants, slower new generation development, and a surge in demand from data centers, these reservation fees have become even more significant. This tightening supply-demand dynamic is driving prices up, affecting both businesses and consumers. With that context in mind, let’s take a quick look back at what we knew going into the PJM capacity auction, and why the stakes were so high.

A Quick Recap: What We Knew Going In

According to our team’s research, during the 2024-2025 planning year, clearing prices hovered near $49.71 per kW. However, the 2025-2026 planning year brought rates that soared above $270 per kW on average—a more than 400% increase. With these sharp cost hikes already impacting customer bills across PJM territories—from PSEG’s jump to $8.77/kW in New Jersey, to PECO’s 12.6% hike in Philadelphia, and BGE’s capacity charges reaching $466.35/MW-day in Maryland—the stage was set for yet another pivotal capacity auction.

The 2026-2027 PJM Auction: Results and Impact

The clearing price for the 2026-2027 delivery year hit a record-setting $329.17/MW-day, the maximum allowed under the latest FERC-approved rules, a 22% increase over last year’s record high. Every zone in PJM’s 13-state footprint cleared at this cap, painting a picture of an extremely tight market.

Rising Capacity Charges: This graph illustrates how postponing your contract start date increases your bill’s capacity component month by month as the high-priced cap year takes effect.

Key facts from the auction:

• Total capacity procured: 146,244 MW (134,311 MW via the auction, plus 11,933 MW via separate requirements), just above the target needed for grid reliability.
• Resource mix: Still dominated by traditional generation—45% natural gas, 21% nuclear, 22% coal, with renewables and hydro making up a smaller share.
• New generation: A modest uptick, with 2,669 MW of new or upgraded capacity entering the market, and 17 plants deferring planned retirements.
• Consumer bill impact: PJM expects the new prices will drive 1.5–5% increases in end-user electricity bills, depending on how local utilities pass-through charges.

Despite some supply-side movement, PJM’s reliability margin remains razor-thin, clearing just 139 MW above the required target. Demand continues to rise—driven by large-scale electrification and the explosive growth of data centers—while generation struggles to keep pace.

How Can Businesses Respond?

There are proven strategies to help reduce your exposure to capacity charges. Cogeneration systems, for example, help to lower your facility’s peak demand from the grid (by producing both electricity and heat at the same time) and, consequently, reduce capacity obligations from improved energy efficiency. For energy-intensive businesses, cogeneration can significantly cut demand charges, turning a looming cost increase into a more predictable expense (especially during periods of extreme market volatility).

Why Act Now?

With energy costs rising and capacity charges reaching all-time highs, now is the time to take control of your energy strategy. Partnering with  Catalyst Power^® gives you access to:

• Flexible retail electricity plans designed for budget stability.
• On-site cogeneration systems that boost both efficiency and resilience.
• Expert guidance on load management and market timing.

By customizing your energy strategy around your unique usage profile, we help you minimize risk, even in a rising market. Ready to take control of your energy costs? Contact our Energy Experts today for a free consultation and see how our services can work for you.