Maryland residents should brace for higher electricity rates after PJM’s latest capacity auction reached the federal price cap, underscoring growing reliability concerns and a supply-demand mismatch across the grid.
The capacity price for the 2026-2027 delivery year hit $329.17 per megawatt-day — the maximum allowed — marking a 22% increase over last year’s already record-breaking results. PJM projects the increase could raise electric bills by 1.5% to 5%, depending on the state.
What Is the PJM Capacity Auction?
PJM Interconnection coordinates electricity for 65 million people across 13 states, including Maryland.
The capacity auction is PJM’s tool for securing a sufficient electricity supply to meet future demand. Power generators bid to supply capacity three years ahead, and PJM purchases what it needs to ensure system reliability.
Capacity prices — charged in addition to energy and transmission costs — reflect the balance between available generation and expected peak demand. When supply tightens, prices spike.
Why Prices Are Surging
Last year’s auction marked a turning point, with PJM clearing most of its region at $270/MW-day, up from just $29 the year before. This year, prices climbed even higher and once again hit the cap, pushing the total cost of the auction to $16.1 billion. The trend signals that PJM’s reliability margin is shrinking.
The causes are clear: demand continues to grow, especially from data centers and electrification, but the new generation is not keeping pace. Case in point, the amount of capacity offered in the auction dropped from last year, even as PJM’s peak load forecast rose by 5,400 MW.
Maryland’s Reliability Crunch
Transitioning to cleaner energy remains a top priority for Governor Moore and the General Assembly. However, with generation retirements accelerating faster than new resources are coming online, Maryland has been compelled to keep older baseload plants, such as Wagner and Brandon Shores, running through 2029 to maintain grid stability.
The reliability challenge is not theoretical — it’s here. Talen Energy had planned to retire both plants in 2025, but PJM flagged immediate voltage stability risks if they shut down as scheduled. In response, PJM, Maryland regulators, utilities, and other stakeholders reached an agreement to keep the facilities in operation until May 2029.
As previously reported on Conduit Street, the controversial Piedmont Reliability Project is one of several transmission upgrades to reduce long-term dependence on aging fossil fuel infrastructure. While aimed at bolstering the grid, the project has sparked local and environmental concerns.
Cost Pressures Keep Mounting
While capacity charges are only part of a utility bill, they’ve grown significantly in recent years. When rates jump this sharply, utilities pass those costs to ratepayers. Other factors pushing prices higher include:
- Grid Investments: Transmission upgrades and deferred plant retirements increase costs.
- Retirements: Older, less efficient plants are closing faster than replacements can come online.
- Delayed Clean Energy Projects: Supply chain issues and interconnection bottlenecks slow new development.
Gas-fired plants remain the backbone of PJM’s capacity mix, making up 45% of resources cleared in the latest auction, followed by coal (22%) and nuclear (21%). Wind, solar, and hydro combined made up just 8%.
What Comes Next
PJM will hold its next capacity auction — for the 2027-2028 delivery year — in December. With limited new supply expected and increasing reliability requirements, the market is likely to reach its cap again.
Stay tuned to Conduit Street for more updates on Maryland’s energy landscape.
