Energy Markets Update

Editor’s Note: In this update, we track key shifts in gas and power markets, regulation, and policy as winter approaches. The 2026 NYMEX strip has climbed above $4.00/MMBtu amid strong storage levels, LNG export growth, and seasonal demand expectations. The U.S. government shutdown risks halting critical EIA and NOAA data, adding uncertainty to market outlooks. Pennsylvania’s challenge to PJM over datacenter-driven capacity costs highlights rising tensions in the RTO, while nationwide utility rate cases test the balance between infrastructure investment and affordability. In New York, stalled clean energy projects and pipeline approvals signal a retreat from ambitious climate targets.

Table of Contents

• Energy Market Update
• 'It's Not You, It's Your 12 Other States' - Pennsylvania Considers Breaking Up with PJM
• Government Shutdown Sends Energy Agencies Into “Low Power Mode”
• Utilities Walk the Tightrope Between Costs and Customer Outrage
• New York’s Green New Deal-”emma”
  

Weekly Natural Gas Inventories

Source: EIA

Energy Market Update

• October signals the end of the storage injection season for natural gas in North America as we move from the ‘shoulder months’ - periods of mild weather and overall market stability between peak demand seasons - to the heating season. It is a pivotal period in gas markets, often defined by higher volatility and riskier bets on how the demand and supply will play out. Many of these bets rely on the availability of high-quality data, much of which is supplied by the Federal Government. 
• We are on day 9 of the US Government Shutdown as the Senate failed to pass a bill to end the stalemate on Wednesday. While stalled permitting for energy infrastructure projects is an immediate effect, a prolonged shutdown could mean the closure of the EIA, halting data collection and the release of storage reports and other key government statistics. A disruption in this data could muddy market outlooks and contribute to volatility. We discuss in more depth below.
• The 2026 NYMEX strip has eclipsed the $4 mark for the first time since the end of July, currently trading at $4.10/MMBtu. NYMEX forwards have surged over the past two weeks by more than 7%. While gas storage is 5% above the five-year average and September averaged 107.3 Bcf/day, the markets are feeling the impacts of the quickly approaching heating season, expanding LNG exports, and more recently, potentially waning supply growth.
• Power markets have remained relatively flat over the past two weeks with only marginal increases (<3%) in the 2026 strip in NYISO and PJM. However, with the recent gas market rally and the fast approaching winter heating season which will inevitably place pressure on gas supply for electric generation, a market squeeze is not far off. 2026 forwards remain at a premium to the trailing 12-months across all major ISO’s, with Houston projecting the largest delta at 43%.

Source: Veolia, ISO Data

• Winter weather forecasts have been mixed within the meteorological community, though generally leaning toward a milder winter. We are still awaiting the NOAA winter weather forecast – expected October 16 – noting that the Government shutdown calls this publication date into question. The near-term outlook shows some heating demand starting up this week in the Northeast and Midwest.
• No hurricanes have made landfall in the U.S. so far this hurricane season. While several Category 4/5 storms have formed in the Atlantic, until this point they've all arced north and away from the East Coast. In years past, hurricanes have majorly impacted energy assets (and markets) by causing unplanned outages, damaging infrastructure, and increasing price volatility as a result. With hurricane season lasting through the end of November, our fingers are crossed that Mother Nature will continue to play nice.
• In other news: The US Senate recently confirmed Laura Swett and David LaCerte to fill the two open spots on the US Federal Energy Regulatory Commission, giving a 3-2 Republican majority until at least June 2026. The new appointees will inherit the task of determining how the US will manage its rapidly growing electricity demand. 
• The Energy Department announced last week a planned cancellation of $20B in Biden-era grants for clean energy projects, which would affect over 600 grants dedicated to funding direct air and carbon capture developments.
• New England’s last remaining coal-fired power plant shuttered last month after more than six decades of operation. The 470 MW station in Merrimack New Hampshire, is ceasing operations more than two years ahead of its previously announced retirement date. Despite low run hours, this is a bullish indicator for winter prices in New England. 
• Turning to PJM, the grid’s independent market monitor released a report last week that unequivocally laid the blame for surging capacity prices in the region on data centers. According to Monitoring Analytics, data center load growth directly resulted in $16.6 billion in capacity auction costs, or about half of the total market value contracted in the last two annual auctions. While most stakeholders have long understood that data centers contributed to the cost premium, having a hard number backed by an independent market monitor is sobering. Some stakeholders are pushing back hard. 

'It's Not You, It's Your 12 Other States' - Pennsylvania Considers Breaking Up with PJM

PA Governor Josh Shapiro's Sept ‘25 ultimatum to PJM Interconnection was to either provide greater transparency and responsiveness or face PA’s departure. Shapiro’s threat represents a critical inflection point for the nation's largest regional grid operator and reflects genuine frustrations shared across PJM's 13-state territory. The practical realities of exiting such a complex interstate energy system present formidable challenges. This week, let's review what has led to this ultimatum and how, despite mounting political pressures from both progressive and fossil-dependent states within the RTO, an actual Pennsylvania exit remains improbable.

Last month, Pennsylvania Governor Josh Shapiro convened a historic meeting of state leaders in Philadelphia to demand sweeping reforms at PJM Interconnection, warning that Pennsylvania could explore options to leave the regional transmission organization if it doesn't become more transparent, responsive to states, and consumer-focused. The ultimatum marked an unprecedented escalation in state-level frustrations with PJM's governance structure and represented the most serious threat to the RTO's stability since its formation.

The challenge facing PJM stems from two major trends: 

• The first trend is divergent priorities of its 13-state footprint, wherein clean energy mandates in progressive states like New Jersey and Maryland directly conflict with more cost conscious and fossil-heavy production states like Pennsylvania and Ohio. This creates impossible tensions in market design, as PJM's one-size-fits-all capacity auctions have recently been producing extreme cost premiums and fail to accommodate the diverse policy goals of member states, leading to accusations of unfair cost allocation and market manipulation.
  
  

             Source: PJM Interconnection

• The second trend is the surge in data center development, concentrated in Northern Virginia and Central Pennsylvania. This is driving unprecedented power demand growth that far outpaces PJM's ability to build necessary transmission and generation infrastructure. PJM’s market monitor attributed datacenter growth alone with adding $7.2 billion in annual costs to the capacity market, or 82% of the increase. The cost of generation capacity, as well as large portions of regional transmission upgrades, is being socialized across multiple states through PJM's cost allocation mechanisms, creating resentment among states that don't directly benefit from the economic development but are forced to subsidize the grid improvements required to support it. 

The scale of this challenge is now evident in Delaware, where lawmakers are now considering limits on data centers through SB 205, introduced on 9/22, that would require Public Service Commission approval for facilities drawing more than 30 megawatts. This bill came in response to proposed mega-developments like Project Washington near Delaware City Refinery, which alone would consume 1.2 gigawatts per hour, twice the electricity usage of every home in the state.

While PA’s exit from PJM remains technically possible through various pathways - including legislative mandates for utility departures, formation of a new independent system operator, or joining another ISO like neighboring NYISO - each option would require FERC approval and involve massive legal, financial, and operational hurdles that make such a dramatic move highly unlikely (See our decision tree analysis below). 

Source: Veolia

Earlier this week, Veolia North America’s energy markets analyst, Katelyn Buckley, reviewing PA’s rift with the RTO, explained that, “Breakups are tough! Some are also expensive.” Indeed, both utilities and power generators in PA would be forced to unwind long-term agreements, likely at unfavorable terms, and the exit fees would be in the billions. For now, this looks less like a real breakup and more like a very public group counseling session amongst a nearly 100-year-old interconnection relationship. We’ll be sure to keep updating you on all of the gossip as it comes. 

Government Shutdown Sends Energy Agencies Into “Low Power Mode”

The U.S. government officially shut down on October 1st, triggering furloughs and budget freezes across multiple agencies. For the energy sector, the immediate fallout includes stalled project permitting, canceled funding commitments, and perhaps most concerning, delays or gaps in public data releases. Without EIA reporting, market participants may be forced to rely on private data providers, driving conflicting views of supply and demand and adding to market volatility. In the short term, this puts renewable buildouts, grid modernization projects, and federally backed efficiency programs at risk, while financing deadlines loom. Impacts and costs to the energy sector will rise the longer the impasse drags on.

Short-Term Impacts: Agencies at Half-Power

Regulatory and oversight functions are among the first to slow. The EPA expects to furlough about 89% of its staff, slowing environmental permitting, inspections, and enforcement. More details can be found here. The Nuclear Regulatory Commission has suspended most licensing and inspection work, stalling nuclear upgrades or life-extension projects. FERC, operating with only “excepted staff,” has effectively paused new interconnection approvals and transmission licensing. More details here.

On the data side, EIA continues publication for now, but a prolonged shutdown could halt weekly storage and production reports. These datasets serve as benchmarks for natural gas pricing, power demand forecasts, and hedging strategies. Without them, ISO planners and traders may have to operate with wider buffers, which means hedging premiums rise and forecasting errors become more costly.

Source: PBS

Supply Side: Projects Hanging in the Balance

The Department of Energy has already canceled $7.6 billion in project funding and is reviewing another $12 billion in cuts (PBS). Much of this funding was earmarked for clean energy projects already under development, including hydrogen production facilities, offshore wind, and grid-scale storage. Cuts are hitting hardest in states with the largest federal clean energy pipelines - California, New York, and Massachusetts - where developers now face delays, scope reductions, or outright cancellations. States in the Midwest and Texas, meanwhile, risk setbacks on transmission expansion and battery integration projects that rely on DOE matching grants.

Permitting compounds the problem. Fossil fuel leasing may continue under continuity provisions, but renewable approvals are largely frozen. Projects already in DOE or FERC permitting queues could see financing collapse if deadlines are missed. These delays jeopardize timelines for renewable integration just as many ISOs prepare for demand surges in the next 2-3 years.

Demand Side: Uncertainty Begins to Shift

While demand levels won’t change overnight, the tools to manage demand are weakening. High-growth states face the biggest exposure:

• California: Storage and solar integration projects delayed by DOE cuts.
• Texas: Data center buildouts continue, but transmission upgrades risk delay.
• Massachusetts: Heating electrification and industrial demand could strain grids if efficiency programs freeze.

At the same time, delayed NOAA weather forecasts and possible interruptions in EIA data make it harder for ISO planners to predict load peaks. Wider operating buffers mean higher hedging costs, since traders must insure against a broader range of outcomes. This uncertainty often trickles down to end users in the form of more volatile contract pricing.

Programs like efficiency and demand response - often federally funded through DOE or FEMP - are also at risk of freezing, reducing flexibility in load management at precisely the wrong moment.

What This Means for Veolia Clients

• Contract & funding risk: Projects tied to DOE grants or matching state funds may need renegotiation, fallback clauses, or revised ROI assumptions.
• Permitting & interconnection delays: Storage, generation, and grid upgrades could face multi-month delays, pushing out timelines and increasing carrying costs.
• Region-specific exposure: Clients in CA, NY, and MA are most directly exposed, but ripple effects will reach Texas, PJM, ERCOT, and ISO-NE as budget reprioritization forces other projects onto the back burner.

Utilities Walk the Tightrope Between Costs and Customer Outrage

US electric utilities are heading for a perfect storm of high energy and expansion costs following a decade of low-cost expansion. With rapidly increasing energy costs already contributing to US inflation, the likelihood of regulators pushing back against utilities' pending capital spending plans is increasing. This could result in even more contentious rate case settlements.

• Low interest rates and natural gas prices throughout the 2010s enabled utilities to invest heavily in transmission and distribution infrastructure upgrades without those capital investments appearing as jarring rate increases on consumers' utility bills.  
• Year over year, electricity and utility gas costs have increased by 6.2% and 13.8%, respectively according to the US Bureau of Labor Statistics's latest consumer price index. With these large increases already being fed through to consumer’s bills, the wiggle room for utilities to increase rates further without facing a harsh political backlash is shrinking fast. The sensitivity around these increases has already led FERC to issue a decision calling for increased transparency from transmission owners on their costs to better assessments of their rate base. 
• The source of these rising energy bills remains a contentious topic. Utilities are attributing the higher prices on the bulk wholesale system, such as form capacity auction prices, supply constraints, and data center demand, while power producers cite regional transmission/distribution cost increases. Even though data center demand is expected to post staggering increases, doubling projected loads in some areas and driving up wholesale capacity rates, they are not the only driver. Markets with forward-looking capacity auctions can partially internalize this increased demand in capacity prices, but regulated energy markets don’t have these forward looking auctions and they are experiencing these price increases as well.
• With capital investment for US energy utilities projected to increase 24% in 2025 and remain high through 2028, the stage is set for a multitude of contentious rate case filings. 

Source: S&P Regulatory Research Associates

In October alone, decisions are expected to be issued on 19 pivotal utility rate proceedings in 12 jurisdictions where electric and gas utilities are seeking $1.4 billion in total rate hikes.

• These rate increases are predominantly focused on utility-based rates making their impact far-reaching for consumers in the affected states. The table below further details the specific jurisdictions where these contentious rulings are pending decisions.

Source: S&P

• With a final decision due Oct. 28, CT’s United Illuminating Co. is seeking $105 million in rate increases. If approved, these increases would raise electric bills on average by 9.3%, with distribution rates being increased by 34%. Facing the same decision date, CT’s Yankee Gas has a pending rate change that is estimated to increase rates by 8%.
• AES Indiana’s latest rate increase has been pared back from the $193 million originally requested back in June to the currently pending $32 million increase. Indiana’s Office of Utility Consumer Counselor is countering with a proposal for rate reductions to state regulators citing insufficient evidence for the hike.
• Eversource subsidiary NSTAR is requesting a rate increase which would result in an expected 13% increase on natural gas bills in Massachusetts due to higher distribution rates. The proposed hike’s jarring magnitude compared to National Grid’s 4% increase has called into question NSTAR’s proposal.
• OH’s electricity consumers are still reeling from this past June’s 10-15% increase for residential and 29% increase for businesses resulting from PJM capacity market results. FirstEnergy Corp’s OH electrical distributors are proposing additional increases totaling $670 million for their base rates.
• OR residential, commercial, and industrial customers are facing proposed electrical rate increases of 1.3%, 1.6%, and 2.2% respectively. While these increases remain modest, their close proximity to the 3.3% rate increase back in January makes them more contentious.    

New York’s Green New Deal-”emma”

The New York Climate Action Council called for hearings last month to officially delay the state's 2040 zero-emission electricity and 2050 fossil fuel elimination targets, acknowledging they're too costly and time-consuming. For close observers, this was a predictable outcome of the first announcement  by Governor Cuomo’s administration in 2019. In this issue, we examine NYS’ growth projections, stalled clean energy projects, and emerging cost impacts arising from the recent upstate and downstate utility rate cases.

• In July, New York Governor Kathy Hochul's office released the annual State Energy Plan, acknowledging for the first time that NY will likely miss key climate targets set by the 2019s Climate Leadership and Community Protection Act (CLCPA). The ambitious goal -100% zero-emission electricity by 2040 and zero fossil fuel usage by 2050 - are now being reconsidered due to the associated cost for ratepayers.  The Climate Action Council called for hearings to officially delay these unattainable deadlines (see timeline of key announcements below).

Source: Veolia

• Reality is setting in: there is a fundamental disconnect between the desire for a cleaner grid and the Empire State's growing need for energy. NYISO’s 2025 Power Trend Report cited 1,600 MW of increased demand by 2030 from electrification mandates, EVs, and upstate AI data centers and cryptocurrency mining operations.
• For New York’s part, the Champlain Hudson Power Express (CHPE) power cable project officially began construction in 2022 and will continue through mid-2026. The official website states that project construction remains on track  and within budget to bring nearly 1,250 MWs (~3% of NYS’s total capacity) of zero-emission hydro directly into NYC’s Astoria Converter Station by the end of the year.  
• While the CHPE power line is underway, other critical infrastructure projects have failed to get a shovel in the ground. The 175-mile Clean Path transmission line, which promised 5 GW of renewable power for NYC, was cancelled late last year.
• This summer the New York PSC also rescinded its 4-8 GW offshore wind transmission determination after new federal permitting blocks put a halt to infrastructure investments. By removing the Public Policy Transmission Need (PPTN), the PSC protected ratepayers from financing an indefinitely stalled project.
• In a reversal from electrification targets, the state’s Public Service Commission (PSC) approved a new Northeast Supply Enhancement (NESE) pipeline, despite previous NYS bans on new natural gas pipelines. Proponents deem it necessary to ensure reliability in NYC’s most populous boroughs (see map below). New York’s persistent pipeline constraints and the federal administration's executive order to expedite energy infrastructure have helped to quickly secure federal approval for the project. 

Approved - Northeast Supply Enhancement (NESE) Natural Gas Pipeline

Source: Williams, 2025

• The retreat from CLCPA climate objectives has been evident in this year's upstate and downstate utility rate proceedings. National Grid achieved a comprehensive settlement agreement with various stakeholders following a slew of public hearings. Ultimately, the PSC significantly reduced National Grid's initial request by over $340 million for electric and nearly $100 million for gas in the first year. The rate increases were accepted at 3.4%, 5.6%, and 4.6% in years 1-3, respectively. As charted below, the cuts were aimed at new infrastructure investments, which include proposed projects that would support the CLCPA targets.
• Meanwhile, Con Edison's proposed ‘26 rate hikes continues to be under PSC examination through the rate case process amid significant pushback from Governor Hochul and a coalition of Westchester municipalities. If the National Grid rate case is any indication, Con Edison’s proposed hikes of 11.4% for electric and 13.3% for gas will almost certainly be slashed. See below our summary of Con Edison’s proposal and where likely cuts by the PSC will land in settlement, based on what we know about National Grid.

Source: Veolia

New York's climate goals were too aggressive for a state still running on natural gas. Infrastructure costs have increased year over year, federal permitting is glacial, and keeping New Yorkers warm with electricity remains technically challenging. Add inflation squeezing household budgets, and the math doesn't work. The result? CLCPA goals are now unattainable, clean energy projects face major roadblocks, and utility rate cases for climate infrastructure have been slashed. National Grid rate payers just got some near-term relief with lower-than-requested rate increases - now all eyes are on whether ConEdison follows suit to put the nail in the coffin for the near-term CLCPA targets. We'll know by December.

Market Data

Market data disclaimer: Data provided in the "Market Data" section is for the newsletter recipient only, and should not be shared with outside parties.