If you live in Pennsylvania or Ohio, you may have noticed more talk about higher electricity prices — or already seen it reflected in your electric bill or renewal offers.
Behind the scenes, many of these price pressures trace back to PJM Interconnection, the regional grid operator that manages wholesale electricity markets across 13 states, including PA and OH.
In January 2026, PJM drew national attention after a White House meeting with governors raised concerns about rising power demand, higher wholesale prices, and the risk that consumers could end up paying more if the grid doesn’t keep up.
But what is PJM, what does it have to do with rising prices and what makes this market unique? Let’s explore.
In this Article:
- What Is PJM Interconnection?
- What are Capacity Costs?
- How do Capacity Costs Impact Your Bill?
- Why are Electricity Prices Rising?
- The White House Meeting: Why Governors Got Involved
- What This Means for Pennsylvania and Ohio Electricity Shoppers
What Is PJM Interconnection?
PJM Interconnection is the independent service organization that manages grid operations for 65 million people across the mid-Atlantic region of the US. They oversee the generation and transmission of power, manages the power grid and works to ensure that transactions between power buyers and sellers clear.
PJM doesn’t purchase electricity for the utility companies. Your local utilities purchase electricity for their customers through a series of auctions, typically twice a year. But PJM does have a direct impact on your electricity bill. That’s because, in addition to electricity supply and electricity delivery, you also pay for “capacity costs” on your electricity bill.
PJM Interconnection is the non-profit independent service organization that manages the electricity grid for 13 states, covering 65 million people in the United States. PJM is the grid operator for: Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia and the District of Columbia.
What are Capacity Costs?
Capacity costs are part of the PJM market structure. They’re designed to incentivize development of new power plants and generation assets. They help ensure that, even if a power plant isn’t used every day, there are sufficient resources when there’s high demand for it, like on hot summer days or winter cold snaps. Capacity costs pay for a power plant to be available for use.
Capacity fees are set in an auction process, where power plant owners compete to see who will offer the lowest prices available to the grid at all times.
For the past two years in a row, PJM’s process for securing capacity has resulted in record high capacity auction prices, which get passed to consumers. This resulted in implementation of a price cap, which both the 2025 and 2026 auctions have hit.
For additional information, read these articles on how 2024/2025 capacity auctions impacted capacity costs in PA and capacity costs in OH.
How do Capacity Costs Impact Your Bill?
Consumers are assigned a share of the capacity costs, based on their usage during times of peak demand, called Peak Load Contribution (PLC).
Each meter on the grid pays their share of the capacity costs based on their Peak Load Contribution (PLC). Every meter has a PLC tag from 1-100. The PLC tag is a based on how much power that meter used during the 5 “coincident peaks” the prior summer. Coincident peaks are the 5 highest usage 15-minute intervals on the grid from June – September. Your PLC tag measures what portion of the peak load you contributed.
Small consumers like homes typically pay a smaller portion of capacity costs than commercial customers. However, large commercial consumers also use power reduction strategies on hot days, specifically to lower their PLC assignment for the year. That leaves residential and small business customers paying more. And that’s a big concern as large data centers enter the market.
Why are Electricity Prices Rising?
Electricity demand is rising rapidly, thanks to the increase in artificial intelligence and data centers that support it. Generation is not keeping up with the increased demand.
Even when markets signal a need for new power, building generation or transmission can take years. That delay keeps supply tight and prices elevated for both power prices and capacity costs.
Common items cited for increased costs in PJM include:
- Power plant retirements. Power plants don’t last forever. Their owners retire plans when they are no longer economical to operate, either due to their age, cost of generation or policy decisions, the plant is retired. Coal power plant retirements have had an impact on available supply.
- Construction delays. A new power plant can take 5-10 years for site selection, permitting, financing and building. Natural gas-fired turbines are currently experiencing a 5-7 year backorder, making it difficult to build large-scale operations.
- Long wait time for interconnection. In an analysis of PJM Interconnection data performed by Inside Climate News in August 2025, wind and natural gas projects can wait 2.5 years for interconnection, while solar and storage projects can wait 3.5 years for interconnection.
Data centers operate 24/7 and have massive power needs. An Energy Department report found that data centers consumed about 4.4% of total U.S. electricity in 2023, and that rate is expected to jump to 6.7-12% of total U.S. electricity by 2028.
The Energy Information Administration tracks average consumer electricity prices by state. Data for PJM states shows prices have increased approximately 8% in Ohio and 11% in Pennsylvania year over year (October 2024 vs. October 2025) . By comparison, the average US Electricity bill increased by 5% in the same time period.
The White House Meeting: Why Governors Got Involved
On January 16, 2026, governors from states in the PJM Interconnection region, including Josh Shapiro of Pennsylvania and Mike DeWine of Ohio, met with White House officials to discuss PJM, grid reliability and rising electricity prices.
Governors are concerned that residential and small business customers could end up paying for grid expansion that’s largely driven by commercial users like data centers.
And they’re concerned about “optics” headed into mid-term elections. According to research by NEADA, the National Energy Assistance Directors Association, 1 in 6 Americans struggle to pay their utility bills. NEADA members administer low-income energy assistance programs funded by the federal government.
Proposals discussed in the meeting included:
- A backstop capacity auction to ensure grid reliability. While recent capacity auctions hit the market price cap, insufficient supply was bid into the market, leaving PJM short on capacity commitments.
- Shifting more capacity costs to large new electricity users instead of passing costs through to consumers.
- Capping wholesale electricity price increases, difficult to accomplish on any type of commodity that trades on open markets.
PJM’s Response to White House Meeting of Governors
That same day, the PJM Interconnection Board of Managers met to discuss options. They approved the backstop capacity auction as requested. They also released new plans for establishing a fast-track connection for large loads (such as data centers) that have their own on-site generation; rules for turning off large loads during times of high power demand; and improvements in load forecasting. (Source: Utility Dive)
How Fast Can They Fix PJM?
“Fixing” PJM takes more than holding meetings, due to competing interests in the markets. Elected officials want affordable electricity, especially going into an election cycle. Grid operators want to ensure reliability. Power plant developers want to ensure a high rate of return for their investors. Any changes to market design such as price caps could deter new power plant investments.
What This Means for Pennsylvania and Ohio Electricity Shoppers
Consumers in Pennsylvania and Ohio can purchase their electricity from the local utility company, or purchase their energy from a registered supplier. Regardless, the local utility company delivers the power to your home or business.
Utility rates change frequently (variable rate). Suppliers can offer you a fixed rate electricity plan that offers protection against rising prices.
However, you’ll pay your meter’s share of capacity costs regardless of whether you have a fixed rate or variable rate. Changes in capacity costs will be passed through on your bill, even if you have a long-term fixed rate contract with a supplier.
While you can’t avoid paying for PJM capacity costs, you may want to consider a long-term contract to at least protect your energy price from uncertainty. We also recommend that you shop your plan each time your contract expires, to avoid paying more than you need to.
For additional information on how to shop for electricity, read our shopping guide for Pennsylvania electricity or shopping tips for Ohio electricity.
>Find out how Texas is addressing data center power demand.
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