Despite a steady national natural gas market, electricity prices for the next 2–3 years are trending upward across much of the PJM region. While prompt natural gas remains near $3/MMBtu thanks to robust production, high storage levels, and mild fall weather keeping short-term demand soft, regional and structural market pressures are telling a different story for forward electricity costs.

National Gas Prices Stay Steady

At the national level, Henry Hub gas prices have held relatively flat in recent weeks. Strong U.S. production and fullstorage levels ahead of winter have kept supply conditions healthy. Mild seasonal weather has also limited near-term demand, further stabilizing market prices.

Regional Basis Tightens in Appalachia

However, regional gas in the TCO Appalachia market has seen basis values tighten from –$0.80 to –$0.60 versus Henry Hub. This means Appalachian gas is now trading much closer to national benchmarks—an indicator that local natural gas, the primary fuel for many PJM generators, is becoming more expensive. As regional fuel costs rise, so too do the generation costs passed through into electricity markets.

Forward Electricity Prices Increasing

The tighter gas basis, coupled with higher PJM capacity prices—up an estimated 60%—is translating into rising electricity forward prices for 2026 through 2028. Capacity costs represent the price paid to ensure adequate generation resources to meet future peak demand, and recent increases suggest tighter long-term market conditions.

Another contributing factor is the ongoing surge in data center development and other large-scale energy demand across the region, which continues to push long-term electricity load growth higher.

What It Means for Buyers

Even as national gas prices appear stable, regional fuel costs, capacity constraints, and growing demand are contributing to higher fixed electricity prices over the next several years. Businesses evaluating 2–3 year electricity contracts should consider locking in strategies early and working with advisors to navigate this evolving pricing landscape.