PJM retail customers were hit with a dramatic and sustained increase in demand due to the duration of the cold in January, as well as the well-publicized capacity price increases beginning in June 2026. The energy demand increases were only satisfied through record natural gas prices, which subsequently led to power prices reaching $4000/MWH.  Gas prices have settled back down to more “normal” levels, which will allow energy prices flowing through on customer bills to make pricing more accessible, but capacity prices will remain elevated for a protracted period of time when implemented.

The 2026/2027 auction results hit $329/MW-day, which, when flowing through to customer bills, could lead to 5% retail price increases effective in June 2026. This result is dramatically better for the 67 million PJM retail customers than the uncapped price, which could have doubled the aforementioned increase, although potential increases will vary by region.

Capacity prices represent between 20-30% of customer bills, and most retail customers in PJM had rarely seen this level of escalation, given that the prior three years’ prices were sub $50/MW-day, which benefitted end-users but were not high enough to incentivize new dispatchable resource construction.

The three-year ahead Base Residual Auction (BRA) was deemed to be an effective tool to ensure appropriate expansion of new resources. The flaws in this assumption were exposed when demand increases, particularly from data centers, appeared in the calculus well above the historical sub 1% load growth, and the fossil retirements hit the supply stack. 

PJM has requested FERC approval to extend the cap on prices for an additional two years, which should allow sufficient time for intermediation through an expansion of new generation resources. PJM is working to design programs that will provide new builds with long-term capacity commitments that will facilitate financing of new projects. In the interim period, retail customers will not be exposed to true market-priced capacity prices and could begin to look at alternative tools to mitigate capacity price exposure. Get in touch with CPV Retail to learn how we can help you navigate the current landscape.