At a Glance
- Competitive generators are responding to market signals: IPPs are building new generation, increasing the output of existing generators through uprates, and keeping essential baseload power online.
- Reliability requirement not met: Despite the auction not meeting PJM’s reliability standard, which provides a 20% cushion, the auction is just step one in a multi-stage procurement framework and does not mean that this is a reliability emergency. This auction provides power for the 2027/2028 delivery year (starting June 1, 2027), not tomorrow.
- What policymakers can do: Lawmakers and policymakers across PJM’s footprint can help bring new generation online by providing regulatory certainty, not political interference.
PJM Interconnection’s most recent capacity auction is a clear and early signal that more power generation is needed as demand rises amid on-shored manufacturing, increased electrification, and data center development. It’s the third auction that has shown an upward demand trend, reflecting the region’s increased power needs – a departure from where the market was just a few years ago. In fact, 5,100 megawatts (MW) of the 5,250 MW in new demand in the auction was from large loads, such as data centers.
Independent Power Producers (IPP) remain committed to delivering reliable and affordable power to millions of Americans, and this auction does not fully reflect the wave of recent project announcements that will take time to come online. PJM and all of its stakeholders must remain committed to delivering cost-effective solutions, removing non-market barriers to development, providing regulatory certainty, and addressing supply chain constraints.
The results of this Base Residual Auction (BRA) remain a clear investment signal: more generation is needed, but it’s essential that continued political interventions do not undermine the signal through out-of-market actions that create uncertainty and risk for new investments.
One thing remains clear: IPPs and competitive markets remain the best way to bring new generation online. Rate basing generation is not the answer and will shift risks to customers without speeding construction or lowering costs.
Key Takeaways: Market Signals Need for More Generation
- Prices Cleared at the Cap
The 2027/2028 BRA cleared at the FERC-approved cap of $333.44/MW-day across the entire PJM Regional Transmission Organization (RTO), up 1.3 percent from the 2026/2027 BRA. This is a direct result of sustained supply-demand tightness and rising load forecasts.
The auction secured 134,479 MW of generation capacity and demand response to meet the electricity demand in PJM’s footprint.
- Market Signals Are Working as Intended
PJM’s 2026/2027 BRA saw 2,669 MW of new and uprated generation, the first increase across the previous four auctions, further demonstrating that market signals are working. EPSA’s members continue to invest in PJM and across the country. Here are just a few examples of what EPSA’s members have been working on:
- Constellation accelerated the restart of the Crane Clean Energy Center to 2027.
- Tenaska is developing a 1,540 MW natural gas-fired power plant in Virginia.
- Vistra received approval from the Nuclear Regulatory Commission to extend by 20 years the operation of its 1,268 MW Perry Nuclear Power Plant.
- Invenergy announced that it was starting construction on a 240 MW solar energy project in Ohio.
- Talen Energy announced that it is partnering with Eos Energy Enterprises to develop energy storage capacity in Pennsylvania.
- Governor Wes Moore announced an agreement with Constellation Energy to fund improvements and environmental projects at the Conowingo Dam, clearing the way for re-licensing and continued operation.
Following the July 2024 capacity auction results—which cleared near the Cost of New Entry (CONE) for the first time in two decades—the generation market has seen a surge in momentum with substantial capital investment rapidly mobilizing. Over 12,000 MW of new generation is expected to enter the PJM regional grid, evidencing a definitive and robust market response. A full list of those projects is detailed in this factsheet.
PJM, whose competitive market saves customers over $3 billion each year, has already taken clear steps to bring more generation online. Here are some of the ways that PJM has been speeding up interconnection:
- In April of 2026, PJM will begin a new process for reviewing interconnection requests that will take only one or two years, depending on the size of the project. Since 2023, PJM has been transitioning to a faster interconnection process which prioritizes projects that are most likely to get built.
- Through PJM’s Reliability Resource Initiative to bring “shovel-ready” generation online, 51 projects were selected that will add more then 9,300 MW of generation capacity.
- PJM announced that it is partnering with Google and Tapestry to speed up the interconnection study process using AI.
- Resource Adequacy Wasn’t Met
While the BRA failed to acquire enough generation capacity to meet its target 20 percent reserve margin, this is not a reliability emergency. PJM continues to hold a reserve margin of 14.8 percent, and the capacity auction is just the first step in the process to acquire capacity.
PJM’s market design includes safeguards to address evolving system needs, including Incremental Auctions that allow additional resources to participate closer to the delivery year.
Investments and building new generation takes time, especially when one considers reliable resources often take more than five years to permit, finance, and build. Adding further to the challenge, the annual auction schedule for the three-year forward delivery period has seen significant delays in recent years, with a compressed BRA auction currently scheduled on a six-month cadence through May 2027. This compression can give the false illusion that capacity progress is not keeping pace.
In the auction results, PJM outlined ways that PJM can still hit the reserve margin for the 2027/2028 delivery year:
- Forecasted peak demand in 2027/2028 is expected to be lower than initially projected.
- Rising electricity demand is likely to delay premature retirements of dispatchable generation.
- In February of 2027, PJM will conduct an Incremental Auction for the 2027/2028 delivery year, which will be another opportunity to meet the reserve margin.
- There were additional “winter-only” resources that were not able to match with “summer-only” resources to produce an annual commitment. These winter-only resources were not included in the auction results but are expected to provide generation capacity in the winter of 2027/2028 “when the system is at its greatest risk.”
Nevertheless, this result shows why speeding up development of reliable power is urgent, and competitive suppliers and generators are already stepping up to meet the demand.
IPPs Are Best Equipped to Meet the Rising Demand
- Independent Power Producers Bear the Risk of Investments
Unlike monopoly utilities, which pass the risk of investments onto ratepayers, IPPs bear the risk if projects get delayed, canceled, or if demand from AI data centers doesn’t materialize.
For example, the PATH transmission project in PJM was expected to deliver coal-fired power over 270 miles from West Virginia to Maryland. While the project was never approved at the state level and construction never started, ratepayers were still on the hook for $250 million of the project’s expenses because American Electric Power and Allegheny Energy began collecting costs from the project.
Monopoly utilities are incentivized to build as much as they can to get more of a return on those funds – consumers’ funds that is, not their own. If monopoly utilities wanted to build generation, they could start tomorrow through their own competitive arms, but they are interested in building generation only if it’s risk-free, using ratepayers’ money instead of their own.
In South Carolina, the V.C. Sumner nuclear expansion project ran years behind schedule, and projected costs more than doubled before it was later abandoned. Meanwhile, ratepayers in South Carolina that never received a single megawatt of electricity still had to pay for the project’s construction costs. Luckily, that project is getting a second look from new investors, but the damage to consumers is already done.
- Monopoly Utilities Face the Same Barriers
PJM has already approved nearly 57,000 MW of projects and processed over 170,000 MW of new generation requests since 2023. However, many of those approved projects are delayed or halted due to external factors including local opposition, permitting delays, and supply chain delays.
Monopoly utilities would face the exact same challenges that IPPs face, but they have less experience building and operating generation.
- Competitive Markets Keep Costs Low
A study from FTI Consulting and the Alliance for Competitive Power found that competitive markets kept costs lower than states with monopoly utilities that build, own, and operate generation. Not only did states with competitive markets experience 5 percent few power outages, but they also reduced emissions more and saw rates for customers rise more slowly.
What Policymakers Should Be Focused On
There are clear steps that policymakers across PJM’s footprint can take to ensure the power remains affordable and reliable.
- Avoid political interference and regulatory uncertainty
For more than two decades, competitive electricity markets have proven that they lower emissions, provide more reliable power, and are more affordable than monopoly utilities and vertically integrated models. Regulatory and market certainty is essential to developers’ ability to secure capital and make the long-term investments needed to bring more reliable power online.
States in PJM already have clear, effective channels to shape the decisions PJM makes through the Organization of PJM States and PJM’s transparent stakeholder process. Governors should focus on ensuring that their appointed representatives are prioritizing the long-term economic and reliability interests of the states’ customers instead of counterproductive actions like injecting political uncertainty into how the grid is operated.
- Ensure accurate load forecasting
Accurate load forecasting remains a clear challenge because overestimating demand could lead to customers overpaying for new and improved infrastructure that’s not ultimately needed. States and utilities must work with PJM to ensure that inaccurate or speculative load estimates are not unnecessarily increasing prices for consumers.
PJM’s refined forecasts, which were released in November 2025, show that while demand growth is real, earlier “high-case” projections included speculative large-load assumptions that are unlikely to fully materialize.
Analysis from Jeffries anticipates that there will be “a sudden increase in [the] level of transparency between hyperscalers, utilities, and PJM,” which could help prevent double-counting of large load and reduce unrealistic demand projections.
In a recent filing, Amazon Web Services expert Michael Fradette, noted that asking companies to predict, with a high degree of accuracy, how much power data centers will need over the next decade is “unreasonable” because consumption will depend on several factors, including customer demand and technological advancements.
There are already clear indications that the worst-case scenario for data center power demand is not materializing, and more accurate load forecasting will ensure that customers across PJM are not overpaying for power.
Breaking Down Utility Bills
It’s also essential to look at generation costs in context. A recent study by Energy Tariff Experts (ETE) analyzed electricity bills across PJM’s footprint to understand what factors were driving prices up. ETE found that electricity generation, including capacity prices like those determined in this auction, made up less than half of electricity bills. The rest of the bill came from investments by utilities in transmission and distribution (T&D) upgrades, charges associated with state policies, and other costs.
ETE found that the generation component of electricity bills remained consistent with historical averages. Meanwhile, T&D investments and state policy charges were the fastest growing components of electricity bills. For example, Edison Electric Institute announced that its members plan to invest $1.1 trillion in grid upgrades across the country over the next 5 years and have already invested over $1.3 trillion over the last decade.
The study’s results are clear. Competitive generation in PJM has kept costs low for consumers while utilities and state policies continue to raise prices. The results from this BRA are just one data point in a long series, and it comes after years of near-records-low capacity prices.
Bottom Line:
Policymakers must resist short-term interventions that distort markets, focusing instead on maintaining long-term reliability and consumer affordability through competition.
See EPSA’s Statement on the 2027/2028 BRA for additional details.
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