Pa. electricity grid manager PJM aims to finalize reform strategy by summer

By:Peter Hall. 5.11.26. Pennsylvania Capital Star

Experts said greater certainty in electricity prices would help investor confidence in the 13-state region.

Electricity grid operator PJM Interconnection will work with industry leaders this summer to finalize a strategy to reform its wholesale electricity markets.

The regional transmission organization is responsible for ensuring that enough generating capacity is available to serve its 67 million customers. But, it's seen prices skyrocket in response to proposed data center development and broader electrification of the economy in general.

Electricity generation and investment experts said Monday at PJM's annual member meeting unpredictability of the market, driven in part by regulatory changes and government pressure, is giving some investors cold feet.

"If the marketplace can't figure out how to do this, then how are we going to figure out how to do it ourselves?" said Bryan Long, executive director of J.P. Morgan's commodities group. "So it's easier just to say 'no' and stay on the sidelines."

During a panel discussion, Long said investors hold sufficient capital to build generating capacity to supply the 15 gigawatts PJM aims to secure in a one-time auction later this year as a backstop against shortages.

"Once there is some kind of stable trajectory to how that the capital can be deployed to the infrastructure that's needed to be invested in … there will be overwhelming amounts of capital that is available at very advantageous financing rates," Long said.

Based near Valley Forge in the Philadelphia suburbs, PJM was created by electricity companies nearly a century ago to ensure electrical reliability between three Pennsylvania and New Jersey utilities. It now serves all or part of 13 states, including Pennsylvania, and Washington, D.C. The organization is made up of more than 1,000 members in the generation, local utility and consumer sectors.

Once little known outside of the electricity industry, PJM has come under public scrutiny as its load forecast calls for peak demand to increase by 7% within the next decade, prompted by a profusion of data center projects.

An auction in July 2024, in which generators bid to provide capacity during times of peak demand, cleared a record price of $270 per megawatt-day. Pennsylvania Gov. Josh Shapiro sued PJM demanding a price cap, leading to a settlement establishing a price floor and ceiling for the following year's auction. The cap has been extended twice under pressure from PJM state governors and the Trump administration.

Maryland Gov. Wes Moore delivered opening remarks at the meeting Monday in which he called on PJM to work with states to reduce energy costs and increase reliability.

"For too long, affordability and reliability have been framed as competing goals. That somehow keeping the lights on tomorrow requires working families to pay crushing prices today. It's a false choice," Moore said.

In addition to completing the backstop auction on schedule, Moore said PJM should require data centers and other large electricity users to pay for their own infrastructure, rather than spreading the cost among all electricity customers and to work faster to approve new energy resources.

Since 2022, PJM has paused new applications to its interconnection queue. That's the first-come, first-served process by which power plants and other energy resources such as solar panels and battery storage are connected to the grid.

Last week, it announced the queue would reopen with more than 800 proposed projects that will be reviewed under a reformed process that would prioritize those closer to starting construction. It would require proof of financial commitments and control of the proposed site to weed out speculative applications.

PJM also last week released a white paper outlining three broad pathways to reform markets.

They include shifting to longer-term commitments for generators to help insulate consumers from price volatility and creating new classes of customers to differentiate between those who can be cut off to help get through peak demand periods and those who cannot.

A third proposal would shift how power generation owners recover revenue to cover the cost of producing electricity, placing an emphasis on payments for the underlying electricity commodity rather than the availability.

Stacey Doré, chief strategy officer for Vistra Corp., a power generator with 44 gigawatts of capacity, said she was pleased to see PJM's reform proposals committed to a competitive energy market because it would ensure affordability for customers.

But, Doré cautioned that more hesitancy about connecting data centers and other large loads to the grid could spell the loss of huge opportunities for the PJM states and higher prices for consumers.

"Being fearful of connecting them has the risk of chasing them to other markets, which ultimately means a smaller set of customers to spread fixed costs across," she said, adding that Vistra takes the position that the coming growth is manageable and that "hyped up" forecasts are responsible for the fear.

"We think there is a lot of excess generation on the grid today in most hours of the year. And what we're really trying to solve is the super peak, fewer than 50, sometimes fewer than 20, hours a year," Doré said.

Pa. electricity grid manager PJM aims to finalize reform strategy by summer • Pennsylvania Capital-Star