PJM Capacity Update – Prices Reach the Ceiling

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By Brendan Boyle, Director, Market Intelligence, Transparent Energy, July 2025

Last July, the country’s largest grid operator (PJM) sent shockwaves throughout the energy markets by reporting a more than 800% increase in capacity costs, which took effect on June 1, 2025. As a reminder, capacity is a component of total electric supply costs designed to provide the price signals that incentivize power plant construction companies to build new generation as it is needed to maintain grid stability.

As expected, this news caused a major uproar, and PJM responded by establishing a price cap and floor for the next auction, which covers the 2026/2027 planning year. That ‘next auction’ is now behind us, and the results are in: Prices cleared at the maximum level, settling at $329.17 per MW-day. This represents a further 22% increase in the cost of capacity, and even higher electric costs for everyone in the region, beginning June 1, 2026. (Note: The reason the rate settled at $329 and not the $325 cap has to do with two separate conversion factors. If interested in the details, please contact your Transparent Energy advisor).

Takeaways for End Users

For years, customers have focused primarily on the forward price of raw electricity – the largest and most volatile component of supply costs. Growing demand for power, infrastructure constraints, and fluid regulatory requirements have changed the equation. This does not appear to be a fad – while capacity prices could experience relief beginning in mid-2027, it’s difficult to imagine a scenario where prices revert to pre-2025 levels anytime soon.

The entire energy landscape is changing, and those not amenable to change are likely to get left holding the bag. We don’t want that to happen to you.

While managing energy is growing increasingly complicated, it’s important to know there are levers that can be pulled. Maintaining pace in this rapidly evolving marketplace comes down to two primary factors:

• Understand how your company consumes energy, and build strategies to implement adjustments, i.e., automated controls, load shifting, Demand Response, and efficiency measures that will lower the facility’s baseline energy footprint and/or peak load contribution.

•  Fortify the way your company goes to market when procuring energy. Evaluate a more comprehensive suite of energy product options and gain access to lowest possible prices by running a Live Auction.

Transparent Energy provides comprehensive solutions on both fronts. Keep up to date with the latest developments and learn to protect your business when it comes to energy expenditure.

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To learn more about capacity costs, demand-side opportunities, and energy auctions and how they can benefit your business, contact us today at letstalk@TransparentEdge.com. For additional background on energy procurement and current market trends, see our News & Views section on www.transparentedge.com.

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