PJM customer costs could increase by $10 billion after Dec. capacity auction

In the third quarter, PJM Interconnection's total cost of wholesale power would have been $101.66 per megawatt hour if not for data center load and its impact on the cost of capacity with power costs increasing 9.8% from $101.66/MWh to $111.61/MWh, PJM's independent market monitor said Nov. 12.

"The inclusion of existing and forecast data center demand in PJM's capacity market has resulted in an irreversible increase of $29.4 billion in capacity market costs for all customers to date," Monitoring Analytics, PJM's IMM, said in its Q3 state of the market report.

That total impact "will increase significantly" when PJM runs its next capacity auction in December, the market monitor said.

This is because the base residual capacity auction for 2029/2030 to be run in December includes most of the forecast data center load and thus effectively ensures that the auction will clear at the maximum price and "add another $5 to $10 billion of data center-related costs to all customers," according to the report.

"There are clear warning signs for the capacity market and for PJM reliability," the IMM said.

The capacity market was short of meeting its reliability requirement in the recent auctions for the 2026/2027 base residual auction, the 2027/2028 BRA, and the 2028/2029 BRA. PJM was also short of meeting its reliability targets for June 1, 2025, and June 1, 2026, on an installed-capacity and unforced-capacity basis.

The volume that PJM is short capacity increased from 208.7 megawatts in the 2026/2027 BRA, to 6,516.6 MW in the 2027/2028 BRA, and to 6,831.3 MW in the 2028/2029 auction, the market monitor said.

"The higher impacts will include higher energy costs and higher transmission costs directly related to interconnecting data center loads without matching generation," the market monitor said.

The IMM maintains that the current situation is due to the unexpected addition of "extraordinarily high levels of data center load," largely based on "unsubstantiated forecasts," that have resulted in the power supply-demand imbalance.

Proposed solutions

The path forward starts with recognizing that the source of the current issues is data center power demand and the next step is to provide a mechanism for data center load to be served reliably while not distorting power prices for all other customers, according to the report.

That step would remove data center load from the next capacity auctions and rely on bilateral contracts between data centers and generators, whether from negotiated "bring your own new generation contracts" or from a reliability backstop auction, which has been delayed.

"PJM should postpone the December auction until it can remove all forecast data center load from the auction and run a reliability backstop auction for all data center load that wants to interconnect and does not have a bilateral contract for generation," the market monitor said.

Continuing to connect data centers that cannot be reliably served due to a lack of available dispatchable power would lead to continued capacity shortfalls, increased reliability issues, "continued maximum [capacity] prices, and continued calls to abandon markets."

The IMM said the market solution would be to require data centers to bring their own new generation, which would include an expedited fast track load and generation interconnection process for large new data center loads that bring their own incremental generation.

Indeed, PJM power demand and prices have been increasing.

Energy market prices increased in the first nine months of 2026 from the same period last year. Real-time load-weighted average power prices rose from $24.47/MWh, or 48.4%, from the first nine months of 2025, from $50.51/MWh to $74.98/MWh.

Additionally, real-time hourly average load in the first nine months of 2026 increased by 3.4% from the first nine months of 2025, from 93,683 MWh to 96,845 MWh.