Plus, what businesses can do to offset this cost increase.

PJM capacity prices for the 2026–27 year just surged 21%, hitting the FERC price cap of $329.17/MW-day. For many businesses, that means higher electricity bills starting next year—potentially a 10–20% increase depending on your load and contract terms.

What’s happening?

• This jump affects all zones in the PJM grid.
• It follows similar increases in the 2025–26 year.
• Several states are already pushing for significant changes to their electricity markets in response.

How Did We Get Here? 

Market Conditions and Auction Dynamics

• Over the past year, forecasted power demand has increased by 5 gigawatts—an indication that higher electricity consumption is expected.
• New renewable energy projects and postponed plant retirements fell short of anticipated capacity, resulting in a shortfall of available supply.
• With supply lagging behind growing demand, the latest BRA cleared at the price cap of $329.17 per megawatt-day. Without this regulatory ceiling, the clearing price would have exceeded $388 per megawatt-day, emphasizing the market’s tightness.
• Unlike long-term planning found in some markets, BRA secures resources just one year in advance. Auction timing is often delayed due to regulations, leaving market participants little time to strategize and prompting more short-term decisions.

Real-World Impact

• The cost increases from last year’s auction are now being felt across the system, especially by end users who are experiencing higher prices during the current delivery period.

Detailed Look at 2026/2027 BRA Results

• The price cap (a “collar”) constrained the clearing price to $329.17 per MW-day, while the unconstrained market would have cleared at $388.57 according to PJM’s simulation.
• The supply side appeared mostly unchanged year-over-year, but after accounting for Effective Load Carrying Capability (ELCC) adjustments, there was actually between 4 to 5 GW of new capacity. Much of this came from new generation, plant upgrades, and rescinded retirements—many older units remained operational.
• Even with this stronger supply, it was outpaced by growing demand, pushing the market price to the cap.

Regulatory and Policy Developments

• Many PJM member states are now reassessing the auction system’s effectiveness, especially for incentivizing new gas-fired generation. Several states are even considering “self-build” strategies to ensure sufficient future capacity.
• PJM’s 2027/2028 BRA also cleared at the price cap, in line with the cap agreed upon by Pennsylvania’s governor.
• Additionally, the Department of Energy issued an emergency order letting the Wagner Generating Station in Maryland exceed typical operational limits for reliability, overriding previous emissions-based restrictions.

What Should Businesses Do?

• Review and renegotiate supply contracts to reduce exposure to volatile capacity charges.
• Invest in energy efficiency and demand management to lower overall consumption and capacity tag.
• Consider distributed generation (e.g., solar, battery storage) to further insulate from market volatility.
• Consult with energy market experts for tailored strategies and risk mitigation.