Why Your Electricity Bill Is Increasing: Understanding PJM Capacity Prices

If you live in states like Pennsylvania, Maryland, New Jersey, Illinois, Ohio, or other states in the PJM region (a grid operator serving 65 million people across 13 states), you may have heard news about electricity price increases that began in June 2025.

This easy-to-understand guide explains what's happening with electricity prices, why bills are expected to increase, and what's being done to address the situation.

What is "Capacity" and Why Am I Paying For It?

Think of capacity as a "reservation fee" that gets paid to the power plants that make up the electric grid. Here's a simple explanation:

Each year, PJM (the grid operator) holds an auction where power plants bid to provide this stand-by capacity—essentially securing these "reservations" years in advance. The price set in this auction determines part of what you pay on your electric bill.

While your electric bill doesn't have a line item called "capacity," these costs are included in your rate. For a typical household, capacity costs have historically made up about 10-15% of your total electricity bill.

Why Are Capacity Prices Increasing So Dramatically?

Capacity prices have experienced three dramatic increases in successive auctions. The 2025-2026 capacity auction saw prices surge from about $29 per megawatt-day to $270 per megawatt-day. The 2026-2027 auction cleared at $329.17 per megawatt-day. Most recently, the December 2025 auction for 2027-2028 cleared at $333.44 per megawatt-day—hitting the FERC-approved price cap while still leaving a 6,623 MW reliability shortfall.

Four Main Reasons for the Price Surge

Simply put: electricity demand is growing rapidly and new power plants aren't being built fast enough to replace retiring ones. This supply-demand imbalance led to the price spike.

How Is This Affecting Your Electric Bill?

Actual Bill Increases Being Observed

Since June 2025, utility supply rates across the PJM region have increased between 5% and 44%. These increases reflect the 2025-2026 capacity costs. Additional increases are expected as the even higher 2026-2027 capacity costs (22% above current levels) are incorporated through utility procurement auctions. The actual impact on your bill depends on your specific utility, as shown in the table below:

For some areas, like Baltimore and parts of Virginia, the increases could be even higher because those zones have additional local grid constraints that resulted in even higher capacity prices. If you are interested in learning more about the specific issues in Maryland, you can read the detailed study commissioned by the Maryland Office of People's Counsel that analyzes the regional challenges.

How Will I See This On My Bill?

The capacity charge typically isn't listed as a separate line item on most residential bills. Instead, it's bundled into your overall electricity rate.

Here's how it works: Each electric meter gets assigned a "capacity obligation" based on how much electricity that meter uses during the grid's peak demand hours. This obligation determines how much capacity must be secured for that meter, and carries a monthly cost (set by the capacity auction) that the electricity supplier must pay. This cost gets bundled into the electricity supply rate you pay, regardless of whether you get your electricity from your utility or an alternative supplier.

If you had a fixed-rate electricity plan that extended beyond June 2025, you may have been protected from these increases until your current contract expires. However, as contracts renew, the new rates are reflecting these higher capacity costs.

Real-World Examples: PJM Utility Rates

Let's look at real-world examples from PJM utilities. The first chart shows the average 12-month offer from electricity suppliers. Prices climbed into June 2025 as offers increasingly reflected the new capacity year. Since then, average offers have eased as wholesale electricity prices have fallen and the capacity cost increase is now fully priced in. To compare today's supplier offers to your local utility rate, you can find your utility on our current offers page.

We can see this trend playing out across all of the utilities that we track in the PJM region. Check it out on our trends page.

Many utilities in the PJM region buy electricity supply for their default service customers - those who haven't chosen an alternative supplier - through periodic procurement auctions. These auctions have already incorporated the 2025-2026 capacity cost increases. As utilities conduct future procurement auctions, the even higher 2026-2027 capacity costs ($329.17/MW-day) will be reflected in customer rates, with timing varying by each utility's auction schedule.

Another important detail is that each utility’s procurement auction prices typically reflect only part of your final electricity rate. Additional components—such as administrative fees, renewable energy credits, transmission charges, and other regulatory obligations—are later added to these procurement costs, affecting the final rate you see on your bill.

Our website tracks these procurement auction results as an indicator of future utility rates, but consumers should keep in mind that actual utility rates will likely differ, and could be higher once all cost components are included.

What's Being Done About High Capacity Prices?

These dramatic price increases have sparked significant political discussions across the PJM region. State leaders are working to balance two competing priorities: attracting new business development that creates jobs and economic growth, while protecting residents from rising electricity costs. It's becoming a complex political challenge that requires cooperation across state lines, since decisions in one state affect electricity prices throughout the region.

Long-Term Solutions Being Pursued

The Reliability Backstop Trigger

While the 2025-2026 and 2026-2027 price increases are already reflected in bills, and the 2027-2028 increases will flow through as utilities conduct their procurement auctions, the fundamental challenge has shifted from price to supply. Long-term solutions are being pursued, but experts warn that capacity prices will remain elevated—and reliability concerns will persist—until new generation capacity comes online in meaningful quantities.

Common Questions About Capacity Prices

Key Takeaways: What You Need to Remember

While these price increases are concerning, you don't have to be a passive consumer. Here are three concrete steps you can take to stay ahead of these changes: