The state of Pennsylvania and Josh Shapiro, the state’s governor, on Dec. 30 filed a complaint against the PJM Interconnection tied to PJM’s capacity auctions. The complaint alleges that flaws in PJM’s capacity auction design threaten to impose significant new price increases.
“Pennsylvania ratepayers face potentially the largest unjust wealth transfer in the history of U.S. energy markets due to PJM Interconnection LLC’s capacity auctions,” the complaint asserts.
The filing asserts that three unexpected developments -- significant load growth, “the country’s most snarled interconnection queue” and a “compressed capacity auction schedule -- have collided with PJM’s inapt design decisions to produce record high prices that are ineffective at delivering new power generation -- the intended purpose of those high prices.”
The Commonwealth of Pennsylvania, and other states PJM serves, “are already experiencing the consequences. The 2025/2026 Base Residual Auction cleared at a price nearly ten times that of the immediately preceding auction. Even that price will almost certainly soon be eclipsed. The upcoming 2026/2027 BRA is forecast to produce a result that could be the most expensive in capacity market history,” the complaint asserts.
Shapiro and the state argue that without the additional changes proposed in the complaint to the capacity auction’s price cap (also described as the top point on the Variable Resource Requirement, or “VRR,” curve), Pennsylvania consumers and ratepayers across the region “face up to a $20.4 billion increase in electricity bills over two years that will do extraordinarily little to ensure grid reliability.”
The complaint said that $20.4 billion is the difference between the projected outcome of an auction conducted with the price cap changes requested by the state and one conducted under the BRA parameters PJM has proposed in its Section 205 filings but without further changes to the price cap.
The complaint asks FERC to take the following further action:
- Establish a refund effective date pursuant to Section 206 as of the date of the complaint.
- Find that PJM’s capacity market cap is unjust and unreasonable; and
- Establish just and reasonable replacement rates by ordering PJM to redefine its capacity auction market cap until the next quadrennial review period
“The Commission and PJM should prioritize these reforms ahead of the 2026/2027 BRA. Taking the steps above could reduce costs by up to half, saving consumers across the PJM footprint over $20.4 billion in unnecessary costs, including approximately $4 billion for Pennsylvania ratepayers alone,” the complaint said.
PJM Responds to Complaint
In response to a request for comment from Public Power Current, Susan Buehler, Chief Communications Officer at PJM, said, “We have been engaged in conversations with the Shapiro administration for several months and we have advanced, through FERC filings, much of what the administration has requested of us related to the capacity market and queue reform.”
She added: “Our conversations with the administration have been productive and we look forward to continuing that engagement. Fundamentally, this is a supply/demand problem that is leading to high consumer pricing, driven primarily by policy choices that are pushing resources off the system along with data center and electrification demand growth.”
Separately, PJM on Dec. 31 posted a statement on its website in response to the complaint.
PJM said that it is “the independent, federally regulated organization that has helped maintain reliable electrical service at competitive costs for Pennsylvanians for nearly 100 years. PJM doesn’t operate with a profit motive -- our primary mission is to operate as the ‘air traffic controller’ for the high voltage power system to keep electricity flowing to 13 states and the District of Columbia.”
PJM said it has “been warning for over two years of the prospect that parts of our country could run short of power during high demand periods. This possibility has been growing, primarily as a result of state and federal policy decisions that are pushing generators to retire prematurely, and also due to unprecedented and rapidly growing data center construction.”
This risk is not limited to the grid managed by PJM, it said.
The North American Electric Reliability Corporation “recently found that large areas of our country face this prospect. PJM shares the concern about rising prices caused by this supply-demand imbalance, and we’ve taken multiple steps to mitigate it. These include already asking our federal regulator for permission to lower the market price cap discussed in the governor’s complaint and proposing to allow for more shovel-ready generation projects to be added to the grid expeditiously.”
PJM noted it has also been approving new, mostly renewable generation projects to connect to the grid at a record pace.
PJM has approved approximately 50,000 MW of such projects, most of which have not been connecting to the grid quickly enough “due to factors outside of PJM’s control, including state permitting, project financing and global supply chain challenges,” it said.
“We remain open to additional solutions to this generational challenge, as long as they support keeping the lights on. Service interruptions, brownouts and blackouts cannot be an option. We have had productive engagement with the Shapiro administration and all of our states to date, and we appreciate their active engagement and advocacy.
It will take all of us working together to help create the conditions for increased investment in new generation that is needed for long term price stability as well as grid reliability for customers,” PJM said.
