5 Takeaways
- D.C. benefits from being part of PJM Interconnection.
- Energy demand is growing faster than it has in decades.
- Competitive generators are investing in new supply.
- Customers shouldn’t bear the cost of speculative load growth.
- Affordability discussions must look at the entire bill—not just generation costs.
Rising electricity bills and rapidly growing demand were front and center at this week’s DC Public Service Commission hearing on energy affordability.
Participants examined several factors contributing to higher customer bills, including rising power demand, Renewable Portfolio Standard compliance costs, and continued growth in utility spending on transmission and distribution. Unlike competitive generation investments, which are funded by private investors and subject to market risk, utility transmission and distribution investments are generally recovered directly from customers through regulated rates.
As supply tightens, costs increase.
For decades, D.C. has benefited from the vast array of power generation options and the resulting reliability and affordability benefits provided by being part of PJM Interconnection, the largest grid operator and competitive wholesale power market in the U.S. Today, PJM has entered a fundamentally different operating environment. After decades of relatively flat electricity demand and historically low wholesale power prices, growing demand from data centers, electrification, advanced manufacturing, and economic growth is increasing the need for new generation and infrastructure investment across the region. This unanticipated growth coincided with state and federal policies that discouraged investment in dispatchable power generation, further accelerating plant retirements and tightening supply.
Representing the Electric Power Supply Association (EPSA), Director of Regulatory Affairs & Counsel Bill Zuretti emphasized that today’s market conditions are the result of a dramatic shift from a period of flat electricity demand allowing customers to benefit from historically low wholesale power prices to one characterized by significant growth in electricity consumption and increasing resource needs.
“For much of the last two decades, PJM experienced flat or declining load and historically low capacity prices,” Zuretti explained. “Those price signals encouraged some resources to retire. Today, demand is growing rapidly, and markets are responding by signaling the need for new investment.”
PJM Executive Vice President Jason Stanek summarized the scale of the challenge, saying “The amount of new demand rivals that of the industrial revolution.”
As Demand Grows, the Market Is Responding
Competitive wholesale electricity markets were designed to use price signals to attract investment when additional resources are needed. Following years of flat demand where customers benefited from historically low prices, today’s market conditions are encouraging new generation development across the region.
Zuretti highlighted that while there are challenges, a robust market response is underway. More than 12 GW of new generation capacity is currently expected to enter PJM, while PJM has approximately 53 GW of projects with signed interconnection agreements and more than 220 GW of projects having applied through its reformed interconnection process. These projects represent a diverse mix of technologies that can help meet future electricity needs while placing downward pressure on prices as they come online.
Mason Emnett, Senior Vice President of Public Policy at the competitive power company Constellation, highlighted ongoing investment and new generation in the region by his company and other competitive generators, including restarting a Pennsylvania nuclear power plant that would restore 835 megawatts of reliable, carbon-free energy to the grid. “At Constellation, we’re investing in our power plants. We’ve repowered three wind farms in Maryland. We’re restarting a nuclear plant in Pennsylvania, and we’re expanding output at other nuclear plants throughout PGM through upgrades,” he said. “We’ve also submitted 5,000 megawatts of new projects in the PGM interconnection queue, and we aren’t the only ones investing.”
Constellation’s response reflects a broader trend occurring across PJM. Competitive generators are investing in existing resources, extending the lives of reliable generation assets, pursuing uprates at existing facilities, developing new projects, and entering innovative commercial arrangements with large energy users.
PJM’s Interconnection Reforms Are Working – Projects Need to Get Built
Several participants pointed to PJM’s interconnection reforms as an important step toward addressing supply challenges, and Stanek emphasized that there is no longer any backlog in PJM’s queue. Since 2020, PJM has processed more than 300 GW of projects, resulting in 103 GW worth of projects with signed interconnection agreements. Today, approximately 53 GW of projects—enough to power roughly 40 million homes—have secured agreements to connect to the grid, but have not yet been built due to factors outside of PJM’s control. Most recently, 811 new generation projects, capable of generating 220 gigawatts of electricity, have applied for PJM’s new interconnection cycle.
Permitting delays, siting challenges, equipment shortages, financing hurdles, and construction timelines continue to slow development long after projects secure a path to connect. These barriers affect projects across all market structures, whether developed by competitive generators or regulated utilities.
Reducing those obstacles and accelerating the development of new supply will be essential to maintaining reliability and moderating costs as demand continues to grow. EPSA is advocating for comprehensive legislation to reform permitting and other paths to reduce barriers to construction of essential resources.
Competitive Markets Protect Consumers From Investment Risk
As billions of dollars are invested to meet rising demand, one question matters for consumers: who bears the risk if forecasts are wrong? EPSA’s Bill Zuretti emphasized that competitive markets protect customers by placing generation investment risk on private investors—not ratepayers.
“When competitive power suppliers build generation, they do so without guaranteed cost recovery,” he noted. “If a project proves uneconomic, unnecessary, or over budget, shareholders—not customers—bear that risk.”
That protection is especially important as data center growth makes load forecasting more uncertain. Overbuilding can leave customers paying for stranded or underutilized assets for decades in a traditional cost-of-service model. Competitive markets reduce that risk by requiring developers and investors to make disciplined decisions based on market signals, project economics, and customer demand.
Watch: How Load Forecasting Impacts Your Energy Bill
The Office of the People’s Counsel raised a similar concern, noting that “Existing residential consumers should not become the financial backstop for speculative projections of economic electricity growth. PJM needs a more rigorous process for determining whether proposed large load development is legitimate and reasonably certain to materialize.”
An investor-owned utility recently cut projected data center energy demand from 30 GW to 13 GW after requiring information that validates proposed projects. That is why EPSA continues to advocate for transparent, accurate, and disciplined load forecasting.
Read more: Getting the Forecast Right
Who Should Pay for Data Center Growth?
Consumer advocates and policymakers across the country are asking the same question: how can the grid support data center growth without forcing households and small businesses to shoulder unfair costs?
Lawrence Daniels, Director of Litigation at the Office of the People’s Counsel, echoed these concerns, saying “OPC’s concern is not the existence of data centers themselves. Our primary concern is who pays for the infrastructure necessary to support them. Under the current structure, many of those costs are being broadly socialized to consumers throughout the PJM footprint, including electricity customers in the District of Columbia.”
As policymakers evaluate solutions, participants discussed a range of approaches—including long-term contracting, co-location arrangements, energy storage, distributed energy resources, and direct agreements between generators and large energy users—that can help support new supply while limiting cost impacts on other customers.
Competitive market-based solutions can help address that concern. Long-term contracting, co-location, energy storage, distributed resources, and direct agreements between generators and large energy users can bring new supply online while limiting cost impacts on other customers.
These arrangements – already being pursued by EPSA member companies and hyperscalers – allow large customers to contract directly with power providers and support the generation needed to serve their own growth. That aligns costs with the customers creating demand, preserves incentives for private investment, and helps ensure existing customers do not become the financial backstop for new infrastructure.
Looking Beyond Generation Costs
The hearing also underscored an important reality: generation costs are only one component of customer electricity bills.
Several participants pointed to transmission and distribution spending, fixed customer charges, and policy-driven costs as important contributors to overall customer bills.
Independent analyses from organizations including Lawrence Berkeley National Laboratory and PowerLines have similarly found that utility spending on transmission and distribution infrastructure has been a major driver of retail electricity bill increases over the past decade. These are costs that utilities pass through to ratepayers, and are only projected to grow.
Consumer advocates urged policymakers to evaluate whether increasing utility capital spending is consistently producing proportional customer benefits. “Utilities have leaned heavily on large-scale capital projects to drive reliability gains,” said Daniels. “But these investments often fail to show strong correlation with improved performance.”
Renewable Portfolio Standard Costs Are Playing a Larger Role
In particular, several speakers focused on the District’s Renewable Portfolio Standard (RPS) and associated compliance costs, which make up an increasing part of the generation portion of Pepco bills. Chairman Emile Thompson noted that, according to Lawrence Berkeley National Laboratory data, RPS costs grew from roughly 5.4% of customer bills in 2020 to 15.2% in 2024. In dollar terms, annual compliance costs increased from approximately $65 million to $272.6 million over that period.
Importantly, discussion of RPS costs was not framed as a critique of the policy itself. Rather, participants emphasized the value of understanding both the costs and benefits associated with renewable energy requirements, including impacts on customer bills, market volatility, emissions reductions, and long-term energy planning.
D.C.’s Unique Position: The Benefits of PJM Access
One theme that received comparatively little attention—but remains highly relevant for District residents—is D.C.’s unique dependence on regional electricity markets.
Unlike many states, the District has virtually no utility-scale generation within its borders and relies heavily on PJM’s regional market for reliable electricity service.
D.C. has benefited significantly from its access to PJM, which is the largest regional transmission organization and competitive power market in the U.S., and saves consumers approximately $5 billion annually. Through PJM, D.C. customers have access to more than 200,000 MW of generation capacity supplied by hundreds of generation owners and power suppliers across 16 states. That regional diversity provides important reliability, resilience, and affordability benefits that would be difficult and costly for the District to replicate on its own.
State Policies Impact D.C. Customers
PJM’s resource mix has been shaped not only by market conditions, but also by a patchwork of state and local policies affecting generation development, plant retirements, siting, permitting, and environmental compliance. While these policies pursue a variety of objectives, they can also affect the availability of generation resources and influence wholesale electricity prices across the regional market.
As a result, D.C. customers are affected not only by policies adopted within the District, but also by decisions made throughout the PJM footprint. The benefits of a regional market flow across state lines—and so do the consequences of policies that impact electricity supply.
In response to growing electricity demand and concerns about future resource adequacy, several PJM states have begun pursuing policies designed to encourage new generation development. Ohio’s recently enacted House Bill 15, for example, seeks to accelerate permitting timelines, reduce barriers to generation construction, expand opportunities for behind-the-meter generation, and attract private capital investment in new resources. This has brought nearly two gigawatts of new generation online to support data center needs, without socializing the costs to ratepayers.
While states may pursue different policy approaches, the broader lesson is that meeting growing electricity demand will require policies that facilitate—not hinder—the development of new generation resources. Because PJM functions as an interconnected regional market, efforts to increase supply in one state can provide reliability and affordability benefits throughout the region, including for D.C. consumers.
The Path Forward
The hearing demonstrated that there are no simple solutions to today’s affordability challenges.
Participants brought a wide range of perspectives on market design, resource planning, renewable energy procurement, distributed resources, utility investments, and consumer protection. Yet there was broad agreement on several fundamentals:
- Electricity demand is increasing.
- Additional supply will be needed to meet that demand.
- New resources must be able to connect to and operate on the grid more quickly.
- Policymakers should evaluate all components of customer bills when considering affordability solutions.
- Reliability, affordability, and sustainability must be pursued together.
As the region navigates this period of rapid change, competitive power generators are committed to responsible growth – responding to market signals with billions of dollars in private capital investment and innovative approaches to optimize and expand existing resources, support efficiency, and build new reliable generation. Competitive wholesale electricity markets remain an important mechanism for attracting private investment, encouraging innovation, and helping ensure the resources needed to power the economy of the future can be built without shifting unnecessary investment risk onto consumers.
Read EPSA’s full testimony before the DC Public Service Commission.
