Originally published June 17, 2013. Updated August 4, 2026.
A capacity market pays power plant owners to keep a generator ready to run, whether the grid calls on it that year or not, and in PJM, the grid operator with a 13-state footprint, that charge now runs $329.17 per megawatt-day. That’s more than 11 times the $28.92 it cost two years earlier, and it’s a separate charge from the electricity you use. The increase is now showing up on electric bills, and data centers are the biggest reason why.
What a capacity market pays for
Your electric bill covers two different things, bought in two different markets. One is the electricity itself, priced by the megawatt-hour in a real-time energy market. The other is capacity, a promise that enough generators exist to cover the grid’s highest hour of demand, priced years ahead in an auction most customers never hear about.
In August 2013, Forbes borrowed a line from an earlier piece by energy analyst Adam James, then at the Center for American Progress. Forbes framed his argument as capacity markets putting “an obvious price on the cost of adding new generation resources.” A capacity market pays generators to be available. It doesn’t change the electricity flowing through your wires today, only what you pay to keep the option open.
How PJM sets that price, and why it jumped
PJM runs a yearly Base Residual Auction that sets one clearing price for a future delivery year, and pays every plant that clears the same rate. The price is quoted in dollars per unforced capacity megawatt-day, PJM’s way of pricing how much of each plant’s capacity the grid can count on.
For the delivery year that started in mid-2025, that auction cleared at $269.92 per MW-day, a jump of roughly 800% from the $28.92 cleared the year before. PJM’s total capacity bill for that one year came to $14.7 billion across its 13-state footprint. A year later, the 2026/27 auction cleared at $329.17 per MW-day, hitting the FERC-approved price cap rather than settling below it, 22% higher than the year before. The auction after that, covering 2027/28, cleared at $333.44 per MW-day, against a newly raised temporary cap.
The table below lines up all four years.
| Delivery year | Cleared price (per MW-day, UCAP) | Change from prior year |
|---|---|---|
| 2024/25 | $28.92 | baseline |
| 2025/26 | $269.92 | +~800% |
| 2026/27 | $329.17, hit the FERC-approved cap | +22% |
| 2027/28 | $333.44, hit a raised temporary cap | +1.3% |
Source: Pennsylvania Governor’s Office, citing PJM, PJM, RTO Insider, and PJM’s 2027/2028 Base Residual Auction report.
Data centers are the biggest reason behind the jump
The operator’s forecast behind the 2026/27 auction added more than 5,400 megawatts of expected peak demand growth in a single year, which PJM said was driven largely by “data center expansion, electrification and economic growth.”
PJM’s independent market monitor put a dollar figure on that. In the 2026/27 auction, data center-linked demand added an extra $7.3 billion, an 82% jump, bringing their total to $16.1 billion of that year’s capacity revenue. Across the last two PJM auctions combined, data centers accounted for $16.6 billion of the $30.8 billion total, about 54%.
That’s more than half the money now moving through PJM’s capacity market tied to one category of customer. The wider strain that growth puts on the grid itself, beyond power plant supply, gets its own look in America’s grid in the crosshairs.
Pennsylvania forced a price cap, and a floor
In 2025, Pennsylvania Governor Josh Shapiro’s office negotiated a settlement with PJM setting a $325 per MW-day price cap and a $175 floor on the 2026/27 and 2027/28 auctions.
The auctions still cleared above that $325 number. PJM’s FERC-approved cap for 2026/27 was $329.17, and the auction cleared right at it. For 2027/28, regulators raised the temporary cap again, and that auction cleared at $333.44, again right at the ceiling. The $325 figure from the settlement and the $329.17 and $333.44 figures from the actual auctions are different caps set through different processes, not competing versions of the same number.
Pennsylvania’s office still estimated the broader deal would save consumers about $21 billion over the two covered delivery years, spread across PJM’s 13-state footprint. Whether a given household sees savings that clean depends on which utility serves it and how that utility passes capacity costs through to retail rates, a question traced in more depth in Exelon’s fight over rising bills.
What this means for your bill
PJM has put its own number on what this means for a residential bill. The 2026/27 clearing price alone, the operator estimated, would add somewhere between 1.5% and 5% to retail bills year over year for many customers. Some zones, PJM noted, could even see a rate decrease, depending on how their utility structures its capacity purchases.
That’s a smaller jump than the roughly 800% the wholesale auction saw. It’s also not nothing. A few percent, multiplied across PJM’s 13-state footprint, is how a $14.7 billion capacity bill for one delivery year turns into a real line on real households’ statements, whether their state’s regulators fought the increase or not.
How ISO-NE and ERCOT do this differently
PJM isn’t the only design running, and the price shock isn’t universal. New England’s grid operator, ISO-NE, runs a Forward Capacity Market that procures roughly three years ahead of delivery and sets a single system-wide clearing price, with zonal pricing layered in since 2017 for areas where transmission constraints limit imports and exports. It’s the same pay-for-availability idea as PJM’s, on a different clock.
Texas runs something else. ERCOT, the grid covering most of Texas, has no mandatory capacity market at all. It’s an energy-only market, meaning generators get paid for the power they deliver and for scarcity pricing that spikes when supply gets tight, rather than for a separate capacity commitment made years in advance. ERCOT targets a reserve margin around 13.75% through that real-time pricing and its ancillary services markets instead. ERCOT is also the only major grid operator in the country that sits entirely outside FERC’s jurisdiction.
What could push PJM’s price higher next
PJM’s temporary price caps don’t run forever. The 2027/28 auction cleared 134,478.1 megawatts against a 20% installed reserve margin target, but only reached a 14.4% reserve margin in practice. PJM’s own modeling for that same auction found that without the temporary cap in place, the price would have cleared around $529.80 per MW-day, well above the $333.44 the cap allowed.
That’s the gap worth watching as the temporary caps come up for renewal, the difference between the $333.44 regulators allowed for 2027/28 and the $529.80 PJM’s own model says the market would have cleared without a ceiling in place. Whether PJM’s reserve margin closes in on its 20% target, or keeps falling short the way it did at 14.4% this time, is likely to decide how close the next auction gets to that uncapped number.
