Electricity costs are about to jump—by around 30% starting in June—for most energy users across the Mid-Atlantic and in some regions in the Midwest. But most customers haven’t heard why.
The cause? A little-known mechanism called a forward capacity auction, which drives costs behind the scenes and ends up directly on your bill.
Every year, an organization called PJM Interconnection—originally named for Pennsylvania, New Jersey and Maryland, but now operating the electric grid and energy market for more than 65 million people across 13 states and Washington, D.C.—holds a capacity auction. It’s designed to ensure there will be enough electricity available in future years, especially during extreme heat, cold or grid emergencies.
To do that, PJM requires utilities to pay power plants (and other sources) to be “on call” for future demand. Those payments are made in advance and then passed through to customers like you.
This year, the auction results have triggered a sharp rise in capacity costs. Utilities including JCP&L, PSE&G, PECO, Con Edison and BGE are now adjusting their rates accordingly. If your utility bill is suddenly higher, this is likely the reason.
For a deeper explanation of how PJM’s capacity auctions work—and why they lead to rate increases—this blog from 2024 provides a helpful overview.
Capacity prices don’t always spike,but this year, several factors pushed them much higher:
These challenges are creating unstable prices and driving up costs. Organizations that use high amounts of electricity during peak hours will feel the biggest impact.
While these costs show up on most bills, they have an outsized impact on:
In deregulated states (like New Jersey, Pennsylvania, Ohio, Maryland, Illinois, Delaware and Washington, D.C.), customers often choose who supplies their power, but they’re still subject to capacity charges set at the grid level.
Your local utility doesn’t set these prices, they’re simply passing along charges that originate in the wholesale market. That’s why many customers are caught off guard.
If your bill suddenly rises, you may not see a detailed explanation. And unless you understand how these costs are calculated, it can be hard to know what levers you actually have to pull.
This isn’t just a one-time issue. Capacity auctions happen every year, and many of the challenges driving price volatility are structural. That means the risk of future increases is likely to continue. In fact, capacity prices are expected to remain near record levels for the next three years.
But with the right visibility into your energy use—and a plan to manage or shift demand—you can take meaningful steps to lower your costs.
While capacity charges can’t be eliminated entirely, industrial facilities can take meaningful steps to reduce their exposure, better manage energy usage and protect against future spikes. A strategic combination of smart monitoring, operational flexibility, efficiency upgrades and on-site generation can lead to significant cost savings—up to 86% of total energy spend in some cases. Here's how:
Total Potential Energy Cost Savings: Depending on your facility's size, usage profile, local utility rates and scope of implementation, you could realize annual energy cost savings of $240,000 to $970,000 (28–86% of total energy costs).
Discover where you can cut energy costs and boost efficiency—at no upfront cost.