Stop me if you’ve heard this one before: PJM Interconnection’s latest power auction easily reached its federally mandated price collar.
In its 2028/2029 Base Residual Auction, held this week, the largest grid operator in the United States came in at the ceiling imposed by a coalition of governors of all 13 PJM states and the Federal Energy Regulatory Commission (FERC), $325 per megawatt-day for its entire footprint. Without the collar, PJM estimates all zones would have cleared at $554.72, ballooning the total cost of the auction to nearly $30 billion, almost double its actual cost of $16.4 billion.
This marks the third consecutive PJM power auction to fetch top dollar. Although initially approved for two auctions, this April FERC accepted PJM’s proposal to extend the collar to the most recent auction and the next, which closes on December 15 for the 2029/2030 Delivery Year.
The 2028/2029 clearing price is a 2.5% decrease from the 2027/2028 Base Residual Auction cap of $333.44/MW-day, marking the first (albeit gradual) backward movement since the 2025/2026 Base Residual Auction caught the attention of the energy industry with its more than 800% price increase.
The 2028/2029 auction secured 13,318 megawatts (MW) of unforced capacity generation (UCAP) and demand response to meet the projected needs of more than 67 million people in PJM’s purview. Regions under the Fixed Resource Requirement (FRR) acquired an additional 10,864 MW in UCAP, bringing the total available to serve forecasted peak electricity demand to 149,182 MW, plus a reserve margin.
The capacity of the resources procured in the auction, plus FRR resources, is short of PJM’s 20% installed reserve margin target by 6,831 MW, meaning that the committed supply is less than what would be required to meet the one-event-in-10-year reliability standard. The grid operator was about 6.5 GW shy of its target in its last auction, its first shortfall ever.
“This shortfall was not unexpected given the conditions PJM has been observing, including a shortfall of approximately 6,500 MW in the previous capacity auction (for the 2027/2028 Delivery Year). These most recent auctions were the first in PJM history in which the entire RTO fell short of the reliability requirement,” said PJM on its website.
Such a shortage does not necessarily mean that the PJM system will be unable to serve load reliably in the delivery year, the grid operator cautions. Instead, it means that PJM would have to operate with slimmer reserves and greater risk. PJM holds a reserve margin of 14.7% for the 2028/2029 Delivery Year.
“These auction results show that demand for electricity continues to grow faster than electricity supply,” said David Mills, PJM president and CEO. “At the same time, PJM recognizes how this supply-and-demand imbalance impacts the reliability of the system and costs for consumers. We are working with government and industry leaders on multiple fronts to restore that balance by bringing on new generation as fast as possible and managing the growth of new load on the grid.”
While the price cap and floor may reduce volatility, PJM recognizes that they do not solve the underlying supply-demand imbalance. Addressing that challenge requires bringing more resources online to keep pace with demand growth. PJM’s actions to increase supply and manage demand include:
- Clearing the generation interconnection queue backlog and implementing our new streamlined cycle process, including a collaboration with Google’s Tapestry to leverage AI to reduce study timelines
- Planning a Reliability Backstop Procurement to address near-term reliability needs and allocate the costs consistent with state preferences
- Developing “Connect and Manage” frameworks that allow large new loads, such as data centers, to connect to the system but operate flexibly when needed to limit disruptions to other consumers
- Creating a FERC-approved, temporary Expedited Interconnection Track for up to 10 state-sponsored, shovel-ready, high-capacity generation projects that could come online quickly to address short-and long-term supply needs
- Maximizing the performance and availability of existing generation resources
- Moving forward with stakeholders on long-term market reform as outlined in PJM’s Powering Reliability Through Market Design (PDF) report
PJM intends to seek FERC approval to hold a special “Backstop Procurement” in September to help address the near-term shortfall in electricity supply. In addition, PJM plans to submit filings on both its Reliability Backstop and its Connect and Manage proposal in the coming weeks.
Wholesale capacity acquired through auctions like this one accounts for only a fraction of wholesale electricity costs. Other contributing factors include the daily cost of power, maintenance, and the expansion of the transmission system. Wholesale costs make up a portion of retail electricity bills.
However, PJM’s customers continue to pay more, argues environmental organization the Sierra Club, which blames the grid operator’s “poor planning” and projected energy demand from data centers. An independent analysis estimates that since June 2025, annual customer costs in PJM have increased by $12.5 billion, skyrocketing from $2.2 billion in 2024 to $14.7 billion the following year.
“It’s little surprise that this capacity auction also hit the auction ceiling once again, resulting in no reprieve for record-high prices for customers,” said Sierra Club senior advisor Jessi Eidbo. “Despite the favorable economics for battery storage, wind, and solar, there was little participation in the auction, indicating other barriers to deploying zero-cost marginal fuel resources that could meaningfully alleviate the financial burden that households across the Mid-Atlantic have been and continue to shoulder. We were fortunate to have the price collar in place, but this only offers a temporary protection measure, not a long-term solution. Concerns over not only the September backstop auction, but subsequent baseline auctions remain.”
It’s unknown how generators will elect to participate in the September auction, the Sierra Club cautions. According to the most recent plans, it would have its own cap and would not be beholden to the $325/MW-day price collar, though measures could take shape in PJM’s pending response to the FERC 206 Show Cause Order on large load interconnection.
“These skyrocketing prices are preventable. PJM should be doing everything in their power to lower prices for their millions of customers, prioritizing responsible guardrails for data center development that protect households and planning for enough clean energy to meet the demands of data centers,” added Eidbo. “Instead, PJM continues to reinforce market structures that favor pricey fossil fuels and stick everyday customers with Big Tech’s power bills.”
The Sierra Club and similar organizations also take issue with PJM’s notoriously fossil-fuel-heavy generation mix. In the 2028/2029 year, about 64% of PJM’s generation will be produced by gas and coal. The supply mix for RPM cleared and FRR committed resources in PJM’s most recent auction in UCAP is comprised of: 46% natural gas, 20% nuclear, 18% coal, 5% demand response, 4% hydro, 2% wind, 2% oil, and 1% solar.
Natural gas increased 5,639 MW UCAP, primarily from an increase in accredited UCAP factors, coal units that converted to natural gas, and units that participated in this auction that did not participate in the last auction. Coal decreased by 2,941 MW of UCAP, primarily due to retirements or conversions to natural gas. Solar increased 651 MW UCAP from new or planned resources.
Supply offered into the 2028/2029 BRA increased 3,447 MW (UCAP),from 136,148 MW in the 2027/2028 BRA to 139,595 MW in the 2028/2029 BRA.
The auction cleared 525 MW UCAP of new generation and generation uprates. The total amount of cleared capacity increased by 3,733 MW UCAP, from 134,585 MW in the 2027/2028 BRA to 138,318 MW UCAP in the 2028/2029 BRA.
The total amount of supply in the PJM service area increased from 200,994 MW to 202,288 MW, or an increase in the total amount of supply by 1,294 MW of installed capacity, or ICAP.
