Update, September 2026: The two auctions after this one set new records at the price cap: $329.17/MW-day for 2026/27 and $333.44 for 2027/28. The 2028/29 auction, released July 14, 2026, cleared at its cap of $325.00, and PJM reported it came in 6,831 MW short of its reliability target. The next auction (2029/30) is scheduled for December 2026.
What Happened in the July 2024 Auction
In July 2024, PJM Interconnection ran its Base Residual Auction (BRA) for the 2025/26 delivery year. That's the annual auction that sets how much generators are paid to commit to being available when demand peaks. For most of the PJM footprint, the price cleared at $269.92/MW-day.
The year before, for 2024/25, it had cleared at $28.92/MW-day. That's not a typo: an 833% increase in one year, in a price that flows through to every commercial and industrial electricity customer in the region.
Why It Happened
Three forces hit at the same time:
1. Retirements outpaced new supply
PJM has lost a large amount of dispatchable generation, much of it coal, over the past decade, and new resources haven't replaced it fast enough. The auction price reflects what it takes to keep firm capacity available.
2. PJM changed how it counts reliability
PJM's newer risk modeling gives many resources, especially intermittent ones like wind and solar, less capacity credit than before. The same fleet counts for less, so the market needs to buy more.
3. Demand forecasts jumped
Data center growth across the PJM footprint drove large upward revisions to its load forecasts. More expected peak demand means more capacity has to be procured, which pushes prices up.
The practical result: a 1 MW capacity obligation costs about $98,500 a year at $269.92/MW-day, versus about $10,600 at $28.92. For a 5 MW account, that's roughly $440,000 more per year. At the 2028/29 price of $325, the same 1 MW costs about $118,600.
How Capacity Costs Flow Through to Your Bill
Capacity costs rarely show up as a line labeled "BRA charge." Depending on how your account is set up, they're built into your supply contract, your utility's default service rate, or both.
| Supply Arrangement | How Capacity Cost Flows Through | Your Exposure |
|---|---|---|
| Fixed-rate contract, capped capacity | Supplier absorbs increases above the cap | Low |
| Fixed-rate contract, uncapped pass-through | Increase passes directly to you | High |
| Index / pass-through contract | Increase passes directly to you | High |
| Utility default service | Built into the regulated rate, adjusted periodically | Medium-High |
| Block & Index (hybrid) | Depends on the fixed vs. index split and capacity terms | Varies |
A common trap: a customer signs a "fixed-rate" contract believing their costs are locked, but the schedule of charges passes capacity through with no cap. When the new capacity price took effect in June 2025, accounts like that saw their bills rise with no change to the "fixed" rate.
Warning: "Fixed rate" does not mean "fixed total cost." Many supplier contracts fix the energy component and pass regulated charges, including capacity, through separately. Always read the full schedule of charges, not just the headline rate.
Your PLC Tag: The Multiplier You Control
Your capacity cost isn't based on your nameplate demand or your average load. It's based on your Peak Load Contribution (PLC) tag: what you used during the five highest-load hours across the PJM system the summer before. Those five hours are called the 5 Coincident Peaks (5CP).
Your tag is the variable you can actually move. If your tag is 2 MW and you bring it down to 1.4 MW by easing off during the 5CP hours, your capacity cost drops 30%, whatever the auction price does.
It's one of the most powerful levers a C&I account has, and one of the most often overlooked. Here's how to reduce your tag.
Contract Language That Protects You
Going into your next supply contract, here's what to ask for and what to watch out for.
Ask for:
- A capacity cap or fixed adder: a specific cap on the capacity component, or a fully fixed capacity adder built into the rate
- Transparency on all non-bypassable charges: a fully loaded quote that shows energy, capacity, transmission, and ancillary components separately
- A material change clause: language that lets you exit early if regulated charges rise past a defined threshold
- PLC tag methodology: confirmation of exactly how your tag is calculated and when it updates
Watch out for:
- "All applicable regulatory charges passed through at cost," which passes capacity increases straight to you
- Capacity adders quoted as estimates only ("subject to change based on auction results")
- Short-term contracts signed while the next auction result is still unknown
- Anyone who quotes you only the energy rate without modeling your total bill
The right benchmark: compare supplier quotes on a fully loaded basis, per kWh or per month, including energy, capacity, transmission, and ancillaries. A lower energy rate can be wiped out by a worse capacity adder.
What to Do Right Now
Whenever your contract renews, three steps apply to every C&I account in PJM today:
- Find out your current PLC tag. If you don't know your tag, you don't know your real cost. Ask your utility or supplier for it, along with your 15-minute interval data, and check your load during last summer's five peak hours.
- Put a 5CP plan in place before next summer. 5CP hours usually fall on hot, humid weekday afternoons between June and September. Alert services and PJM's own load forecasts can give you notice ahead of likely peak days.
- Check your contract's capacity language. If capacity passes through uncapped, model your cost at the current price and factor it into your renewal decision.
The Bottom Line
This wasn't a one-time spike. Every auction since has cleared at the price cap, and PJM's latest auction came in short of its reliability target. The accounts that manage this cost on purpose, through PLC tag reduction and smart contract structure, will keep a real cost advantage over the ones that don't.
If you'd like to know what capacity is costing your account and what a lower tag would save, we'll run that analysis free, with no obligation.