If your business is located in the PJM region (13 states plus D.C.), you’re likely experiencing higher electricity bills as of June 2025. But the reason might surprise you: it’s not just about how much energy you use, but when and how the power grid prepares for future demand.
‍
It all comes down to something called the PJM capacity auction - and while it sounds technical, understanding how it works (and what it means for your bill) could help you avoid surprise costs and take control of your energy strategy.

What is the PJM capacity auction?

The PJM Interconnection is a regional transmission organization (RTO) that manages the flow of electricity across a large portion of the Mid-Atlantic and Midwest U.S. It ensures the grid has enough power to meet customer demand - not just now, but three years into the future.

To do this, PJM runs what’s called a capacity auction, also known as the base residual auction (BRA). This auction helps guarantee that electricity providers will have enough generating capacity on standby to meet peak demand - like those scorching days in July when every AC unit is blasting at full power.

In other words:
‍
✅ Energy markets pay for electricity you use today

✅ Capacity markets pay to ensure enough power is available tomorrow

Generators that win these auctions commit to providing power during future peak periods, and customers (like your business) help cover the cost through something on your bill called a capacity charge.

‍

The auction for the 2025–2026 delivery year saw capacity prices nearly double, jumping to $64.87 per megawatt-day. This means your energy bill could include significantly higher capacity charges, even if your electricity usage stays the same.

Why are capacity prices going up?

Several market forces are driving these higher prices:

• Retirement of older power plants (especially coal-fired facilities), reducing available supply
  
  
•  Increased demand from data centers, electric vehicles, and population growth
  
  
• Rising natural gas prices, which affect the cost of power generation
  
  
• Delays in building new generation and transmission infrastructure
  ‍

PJM is also revising how its capacity auctions are structured, adding further uncertainty for future prices.

What this means for your business

If your business is located in the PJM region, whether in Ohio, Pennsylvania, Maryland, or elsewhere, you’re likely to see higher electricity bills starting June 1, 2025, even if your usage doesn’t change.

Here’s how capacity price hikes could affect you:

• Higher monthly bills due to a larger portion of your rate going toward capacity
  
  
• Less predictability in budget planning if you're on a variable or pass-through contract
  ‍
• Missed savings opportunities if you're not actively managing your energy strategy
  

What you can do now to stay ahead

While you can’t avoid capacity charges entirely, you can take steps to reduce your exposure and make smarter energy decisions:
‍
‍✅ Reduce your capacity tag - Your capacity charge is based partly on how much energy your business uses during the five highest peak demand hours of the year. If you can lower usage during those times, you can reduce your costs.

‍✅ Lock in strategic contract terms - Fixed-rate contracts or block-and-index options can give your business more control and budget certainty, especially during volatile market periods.

Let Arise Energy help you navigate what's ahead

Arise Energy is the modern way to buy energy. What makes us different?

• Direct access to top-tier suppliers: Easily compare quotes, with transparent pricing, so you can make better choices faster.
• Custom, up-to-date quotes: Automated refreshes ensure your business has real-time access to the most competitive rates.
• Clear recommendations: Our smart tech evaluates customers’ needs to deliver data-driven recommendations to empower informed decisions.
  
  

We believe that energy shouldn’t be a burden; it should be a strategic advantage.

Want to make sure you’re not overpaying for capacity costs?
Talk to one of our energy experts or sign up for free and request a custom quote today.