On July 30th, the PJM Interconnection announced that the cost of capacity for most of its utilities will increase from about $28.92/MW-day to $269.92/MW-day. This dramatic increase is a result of power plant retirements in the region lowering electricity supply against higher demand. The purpose of this capacity auction is to secure enough resources to meet reliability requirements and the projected demand for all customers in the PJM region. These higher capacity costs will affect everyone within the PJM region whether your electricity is supplied by the utility or retail supplier.
What Does this Mean for PJM Customers?
If you’re in a third-party electric agreement, suppliers will pass through charges with agreement provisions. For utility customers these charges will occur through tariff changes or rate filings. The PJM capacity price increase will take effect June 2025.
To learn more, read the PJM announcement here.
What is the PJM Region?
PJM is an Independent System Operator (ISO) responsible for managing and operating the electric grid. The region includes Pennsylvania, New Jersey, Maryland and parts of Delaware, Illinois, Indiana, Kentucky, Maryland, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia, and Washington, D.C.
How to Reduce the Impact of the PJM Capacity Price Increase
Since capacity rates are based on your electric usage during peak hours, many businesses are curtailing demand during this timeframe to result in significant cost reductions. The ISO defines your capacity costs when demand is highest – usually on the hottest days of the year. These changing times for energy, capacity, and demand management may call for a different supply procurement approach going forward.
At Environ Energy we are committed to ensuring customers have the knowledge and the means to avoid unnecessary costs and reduce their energy budget. Each ISO region calculates capacity costs slightly differently. For information on lowering capacity costs in your specific region connect with an Environ Market Advisor.
About Environ Energy
Environ Energy has been at the forefront of energy management and sustainability solutions for decades, guiding clients toward advancement in energy-efficient buildings, clean energy buying, energy resilience, and regulatory compliance. With a portfolio of over $1B in energy contracts and over $100M in client savings, Environ services are delivered to some of the largest institutions and government agencies across industries including healthcare, manufacturing, data centers, food and beverage, hospitality, real estate, finance, and more.