When it comes to managing your business’s energy costs, there’s more to consider than just your electricity rate. One of the lesser-known (but greatly important) factors is something called the PJM capacity auction.

If you're a business located in the PJM region (which spans 13 states and Washington, D.C.), capacity costs are already impacting your electricity bills - and they’re about to rise even more in the coming years.

Let’s break down what a PJM capacity auction is, why it exists, and most importantly, what it means for your business.

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:
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✅ 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.

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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
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• 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:
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‍✅ Reduce Your Capacity TagYour 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 TermsFixed-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

At Arise Energy, we make energy procurement smarter, faster, and more transparent. 

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 request a custom quote today.