Energy Prices To Surge in 2025
What the PJM Capacity Price Surge Means for Energy Costs in 2025
Businesses and residents across the PJM Interconnection service area are preparing for a sharp increase in energy costs as capacity prices are set to rise dramatically starting June 1, 2025. PJM, the largest independent system operator (ISO) in the United States, oversees the electricity grid for 13 states and Washington, D.C. Recent capacity auction results revealed an 833% increase in capacity charges, from $28.92 per megawatt (MW) daily in 2024-2025 to $269.92 per MW daily for 2025-2026. For businesses, this surge could lead to energy cost increases of 20-30%, placing significant pressure on operating expenses.
DRIVING THE HIKE
The price hike is primarily driven by a shrinking supply of power generation due to the retirement of coal and other power plants, which have not been replaced quickly enough by new resources. At the same time, rising electricity demand, fueled by industrial growth and electrification efforts, has further tightened the supply-demand balance. Regulatory changes approved by the Federal Energy Regulatory Commission (FERC), such as updated reliability modeling and capacity accreditation reforms, have also contributed to the spike in costs.
THE IMPACT
This price increase will impact all customers within PJM’s footprint, which includes Pennsylvania, Ohio, New Jersey, Virginia, Maryland, Delaware, West Virginia, and parts of Illinois, Michigan, Indiana, Kentucky, Tennessee, North Carolina, and Washington, D.C. Whether customers purchase electricity from a utility or a retail supplier, these higher capacity costs will be passed along through increased rates, as capacity charges account for about 25-30% of total energy bills for many businesses.
TAKE ACTION
With costs rising, businesses must act quickly to manage the financial impact. Reducing peak electricity usage through demand response programs can lower capacity charges by minimizing the demand placed on the grid during critical hours. Implementing energy efficiency measures, such as upgrading lighting or HVAC systems, can also cut overall consumption and reduce exposure to peak demand costs. Solar energy is another effective strategy. By installing on-site solar panels or entering into power purchase agreements (PPAs), businesses can offset their reliance on the grid, reducing capacity-related expenses while locking in more predictable energy costs.
FUTURE STRATEGIES
The looming capacity price surge underscores the need for proactive energy planning. Businesses operating in PJM territory should start exploring strategies now to mitigate these increases and protect their bottom line. Sussex Energy is here to help businesses navigate these challenges with tailored solutions, including solar energy systems, energy procurement, and energy audits, to reduce and stabilize energy costs. Contact us today to get started.
