In Pennsylvania or Ohio, discussion of higher electricity prices always mentions PJM Interconnection and capacity. PJM Interconnection is the regional grid operator that manages wholesale electricity markets across 13 states, including PA and OH. In PJM, you not only pay for electricity and delivery, you also pay for capacity, the costs paid to ensure adequate supply at maximum electricity demand levels.
In this Article:
- What Is PJM Interconnection?
- What are Capacity Costs?
- What Caused Capacity Costs to SkyRocket in PJM?
- How Do Capacity Costs Impact Your Bill?
- How Do we Make Data Centers Pay their Share?
- Why are Electricity Prices Rising in PA and OH?
- How Electricity Consumers Can Keep Bills Low Despite Rising Energy Costs
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 years in advance, where power plant owners compete to see who will offer the lowest prices available to the grid at all times. Here are PJM capacity auction results for 2020 – 2030.
| Delivery Year | Capacity Clearing Price ($/MW-day) | Year Over Year Change | Auction Date |
|---|---|---|---|
| 2020/2021 | $76.53 | NA | 2017 |
| 2021/2022 | $140.00 | +83% | May 2018 |
| 2022/2023 | $50.00 | -64% | May 2021 |
| 2023/2024 | $34.13 | -32% | June 2022 |
| 2024/2025 | $28.92 | -15% | December 2022 |
| 2025/2026 | $269.92 | +833% | July 2024 |
| 2026/2027 | $329.17 (cap) | +22% | July 2025 |
| 2027/2028 | $333.44 (cap) | +1.3% | December 2025 |
| 2028/2029 | $325.00 (cap) | -2.5% | July 2026 |
| 2029/2030 | TBD; capped at $325 | December 2026 |
*No auctions held in 2019 or 2020 while FERC considered changed to capacity market rules. Auctions have been held more frequently since then to get back to a 3-year forward rate setting mechanism. Auction results data sourced from PJM.com.
What Caused Capacity Costs to SkyRocket in PJM?
Costs for the 2025/2026 year, set via auction in July 2024, jumped by 833% from the prior auction, causing residential price increases in Pennslyvania and Ohio. PJM capacity cost increases were primarily due to three reasons:
- PJM changed how it counts available power. Solar and wind resources get less credit toward meeting demand than they used to, even though there were no actual changes in those resources
- Fewer power plants are available. Older gas and coal plants are reaching the end of their useful life and being retired. New plants aren’t being build fast enough to keep up.
- Demand is climbing fast. Data centers, AI, and a growing economy are pulling more power off the grid.
The Federal Energy Regulations Commission (FERC) capped the prices in subsequent auctions to protect consumers and to push PJM reform. Not only have auctions hit the cap every time, the most recent auction in July 2026 resulted in a shortfall of resource commitments, which will lead to additional auctions and rate setting in September 2026.
How Do Capacity Costs Impact Your Bill?
This is all great to know as background, but the key question is, what about me? How do capacity costs impact my bill? Capacity costs appear on your PA and OH electricity bill as a separate line item.
Consumers are assigned a share of the capacity costs, based on their usage during times of peak demand, called 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 to September. Your PLC tag measures what portion of the peak load you contributed, and thus your portion of the capacity costs for your state.
Small consumers like homes have a smaller PLC tag and 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.
No, each consumer in PJM pays capacity costs based on their demand or Peak Load Contribution. You will pay these costs whether you buy your electricity from the local utility under the price to compare/standard service offer, or buy a fixed rate electricity plan from a registered electricity supplier.
How Do we Make Data Centers Pay their Share?
Growing demand, especially from AI data centers, is driving capacity costs and wholesale electricity costs. Data centers also require more transmission and distribution investment, costs that are generally spread to all consumers. Public utility commissions and state officials are under pressure ensure that data centers pay their fair share of the costs.
The Pennsylvania PUC issued an order in May 2026 with a model tariff for each utility to follow, requiring firm energy commitments and direct payment for infrastructure costs. PPL Electric has taken this further, plus included requirements for large loads to pay into a low-income customer assistance program.
The Ohio PUC has been more hands off, allowing each utility to set their own data-center-specific regulations. AEP Ohio has done so, and the PUCO has ordered First Energy to do the same.
PJM is working with the federal government to establish load management emergency requirements. During capacity shortages, large loads like data centers would be subject to curtailment. That’s similar to legislation enacted in Texas in June 2025 under TX Senate Bill 6, which requires large customers contribute to interconnection costs and requires remote disconnection capabilities to be managed by ERCOT, the Texas grid operator.
Consumers can contact their local politicians to ensure their government takes action on this issue.
Why are Electricity Prices Rising in PA and OH?
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, leading to rising prices.
Common items cited for increased electricity 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.
Average Electricity Rates in Ohio – Supplier Rates
- Average electricity rate in Ohio Power (AEP Ohio): 11.68¢ per kWh
- Average electricity rate in The Illuminating Company (FirstEnergy): 11.24¢ per kWh
- Average electricity rate in Columbus Southern Power (AEP Ohio): 11.68¢ per kWh
- Average electricity rate in Duke Energy Ohio: 11.37¢ per kWh
- Average electricity rate in AES Ohio (formerly DP&L): 11.32¢ per kWh
- Average electricity rate in Ohio Edison (FirstEnergy): 11.18¢ per kWh
- Average electricity rate in Toledo Edison (FirstEnergy): 11.24¢ per kWh
Average Electricity Rates in Pennsylvania – Supplier Rates
- Average electricity rate in Duquesne Light: 15.66¢ per kWh
- Average electricity rate in Met-Ed (FirstEnergy): 14.57¢ per kWh
- Average electricity rate in PECO Energy: 13.02¢ per kWh
- Average electricity rate in Penelec (FirstEnergy): 14.10¢ per kWh
- Average electricity rate in PPL Electric Utilities: 14.72¢ per kWh
- Average electricity rate in Penn Power (FirstEnergy): 14.80¢ per kWh
- Average electricity rate in West Penn Power (First Energy): 13.54¢ per kWh
How Electricity Consumers Can Keep Bills Low Despite Rising Energy Costs
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) and are often referred to as the price to compare or standard service offer rate. Suppliers can offer you a fixed rate electricity plan that offers protection against rising prices.
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.
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