- PJM set to release pricing details for securing power supply
- Baltimore, Virginia are poised to earn premiums in auction
More than 65 million Americans are facing the prospect of significantly higher electricity prices next year, thanks to shrinking energy supply and rising demand on the biggest US electric grid.
An increase for the year starting in June would follow a power auction held in 2023 that saw prices come in at a decade low of $28.92 per megawatt-day. The latest auction results are expected Tuesday afternoon. This time around, analysts predict prices could be two to four times higher.
The jump comes as the grid pushes to rein in an oversupply of capacity just when Virginia ramps up power demand to feed its artificial intelligence and data centers. Closures of coal and natural-gas fired plants will also remove about 4 gigawatts of generating capacity from the grid — enough to power about 3.2 million homes.
The grid operator, PJM Interconnection LLC, is tasked with coordinating with power plants and utilities and managing a grid that stretches from New Jersey to Illinois. PJM holds auctions to ensure sufficient supply. Prices that emerge from those auctions are charged to homes and businesses through their utility bills.
PJM’s auction is one of the most closely watched events in the US power markets. Results typically signal to plant owners and project developers whether to keep aging power plants open or build new generators, respectively. It also provides plant owners with an important source of revenue to perform maintenance and be ready to serve in tight conditions.
More than a dozen PJM market observers, from analysts to financiers, surveyed by Bloomberg News see grid-wide prices rising compared to last year’s auction. Expectations vary significantly, ranging from $35 to $125 a megawatt-day, though most are somewhere in the middle.
PJM is also imposing new rules limiting how much supply they’ll take from plants that have suffered outages during extreme weather. The newest and most efficient gas generators could see the total megawatts they earn payouts for drop by 20% while older gas units may see their supply discounted by almost a third, according to Moody’s Ratings.
Baltimore may feel the biggest pinch in terms of prices — the city draws power from a Brandon Shores coal-fired plant that is on the brink of closing. That threatens to drive up payouts to other generators in the area by more than fivefold to $400 per megawatt-day.
“I am worried about cost increases,” said Lorig Charkoudian, a Maryland lawmaker who has been warning PJM of a coming supply crunch in Baltimore for years. “We count on PJM for reliability and keeping costs down.”
While PJM said it cannot comment on expected prices until the market closes, the retirement of Brandon Shores wasn’t expected and was the result of a private agreement, spokeswoman Susan Buehler said Monday in an emailed statement. “PJM has been expressing its concern about a supply and demand mismatch for quite some time now.”
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