What’s New
Governors from 11 states across the mid-Atlantic and Midwest are fed up with PJM, the non-profit entity that manages the region’s electricity grid. PJM’s capacity auctions (the system that pays power plants to promise future supply) have hit record highs two years in a row.
At a multi-state summit in Philadelphia to address concerns over PJM, Pennsylvania Governor Josh Shapiro warned that PJM has “months, not years” to reform.
If they don’t see change, Pennsylvania and possibly other states could take the extraordinary step of pulling their utilities out of PJM altogether. The demands from state governors include:
* Formal seats for states in PJM’s governance structure.
* Faster interconnection for new energy projects.
* A stronger focus on consumer costs in PJM’s decision-making.
* Transparency in how capacity and transmission costs are set.
Why It Matters
PJM’s Capacity Auction is one of the major contributing factors to consumers seeing double-digit bill increases last summer.
Because of these increases, in the last two years, hundreds of thousands of people across the country (especially in PJM’s 13-state region that includes PA and NJ) have heard of PJM Interconnection for the first time as bills have shot up.
State Governors in PJM’s region argue that PJM’s slow approval of new projects and its closed governance structure are making things worse.
“We need states to have more of a say in how PJM operates. We need to move more quickly on these energy-producing projects, and we’ve got to hold down costs. If PJM cannot do that, then Pennsylvania will look to go it alone…. If PJM refuses to change, we will be forced to go in a different direction. That is not a path that I am eager to chart, but I am not willing to stand idly by and let PJM dictate our future… “We can produce enough energy for us, and we can produce enough energy at a far quicker rate than PJM is able to right now.”
- PA Governor Josh Shapiro
So What is PJM, and What is a Capacity Auction?
PJM Interconnection is the largest regional transmission organization (RTO) in the United States, managing electricity for more than 67 million people across 13 states and Washington, D.C.
They cover Illinois to the Atlantic coast and from Michigan down into Virginia and North Carolina. Headquartered outside Philadelphia, PJM has been coordinating electricity flow for nearly a century.
They essentially do two things:
* They act as the air traffic controller of the grid. PJM directs electricity from generators to utilities, who then deliver it to homes and businesses.
* They run the wholesale markets where utilities buy electricity. Those markets determine which power plants operate, how new projects connect, and how much electricity ultimately costs.
One of its most important tools is the capacity auction. In this auction, PJM looks several years ahead and pays power plants simply to promise they’ll be available in the future.
This guarantees electricity will be available and reliable during times of peak demand, like summer heat waves or winter storms. Nearly a quarter of the charges on monthly bills in PJM states come from capacity payments alone.
The Problem
Unlike other regional grids, states have no formal role in PJM’s governance, a gap that state governors are now demanding be fixed.
PJM’s decisions go far beyond reliability. They set many rules relating to how to value renewables, storage, or demand response compared to gas and coal; how to allocate the cost of transmission upgrades across states, and how it forecast future demand.
Unsurprisingly, states want more of a voice in that process than they’ve previously had.
How PJM’s Auction Has Driven Up Bills
For years, PJM’s markets kept prices relatively steady. But in the last two years, we’ve seen record increases in the region.
Capacity auction prices, once as low as $30 per megawatt-day, jumped to around $270 in 2024 and then cleared even higher in 2025, right at a $329 price cap negotiated after Pennsylvania filed a complaint in 2024.
In simple terms, that’s eight to ten times higher than typical levels. Households across their 13-state region have seen double-digit percentage increases on their power bills, with utilities warning of more hikes in 2026.
There are several reasons for this:
* PJM began tightening how it credits renewables and storage for reliability, meaning 100 megawatts of solar might only count as 8–10 megawatts of dependable supply.
* At the same time, demand exploded, led by the AI and data center boom centered in Northern Virginia but spreading to Pennsylvania, Ohio, and beyond.
* Clogged interconnection queues, aging gas plants, and supply chain problems for new natural gas turbines have all contributed as well.
* New solar, wind, and battery projects wait years in line to connect to PJM’s grid. That means cheaper resources can’t enter the market quickly enough, keeping supply tight and prices high.
PJM’s CEO has said the organization is “open to discussions” but warned reforms could “take some time.”
There are a lot of unknowns that need to be answered about what it would look like if states wanted to strike out on their own. But the fact that governors are even considering it shows that this is a crisis.
Where Solar Fits Into The Puzzle
PJM’s rules make it harder for solar to show its full value. In recent capacity auctions, PJM tightened the way it credits renewable energy toward reliability.
A solar project that can generate 100 megawatts of electricity is only counted as 8–10 megawatts of dependable capacity because PJM assumes it won’t always be producing at peak times. This conservative math means it takes far more renewable bids to meet the region’s demand curve, which drives auction prices higher.
But because it’s so fast to deploy, solar is the fastest-growing and most affordable source of new energy in PJM’s territory.
Solar is a way to bring new supply online quickly, lower long-term costs, and reduce reliance on older coal and gas plants that depend heavily on capacity revenues to survive.
Governors are frustrated that PJM’s slow approval process leaves new solar projects stuck in interconnection queues for years, delaying their ability to compete and drive down prices.
In short, families across the PJM region are seeing higher bills partly because solar and other clean energy projects aren’t being connected fast enough.
Governor Shapiro has argued that because Pennsylvania is a net energy producer, it can host new energy-hungry industries and expand renewables like solar, but only if PJM clears the backlog and lets solar projects move forward.
Under the current rules, the value solar provides is discounted, its growth is slowed, and the region remains more dependent on older, more expensive generation. Most Governors pressing PJM for reform see solar as central to both cutting bills and meeting the demand surge from AI and electrification.
Sources:
PJM and the capacity crunch | Latitude Media
Pennsylvania leaving regional electricity grid is still on the table, Shapiro says
Pennsylvania Threatens to Go ‘Own Way’ If Grid Won’t Change
Soaring Power Bills in Largest US Grid Pose Risk for Republicans - Bloomberg
Governors push PJM to hold down power costs - E&E News by POLITICO
States threaten to leave PJM without expanded role in grid operator | Utility Dive
