Feds OK settlement between Shapiro, grid manager to control electricity prices

Federal regulators approved a deal between Gov. Josh Shapiro and PJM Interconnection to limit some electricity price hikes.

PJM is a regional transmission organization, which works to secure generation capacity for utility companies within its 13-state network. It holds annual auctions in which the lowest bidder earns the right — and responsibility — to provide power when called upon, ensuring the grid can keep up with peak demand times.

The settlement, approved Monday, caps what power plants can charge at $325 per megawatt per day, a measure of the cost to reserve a megawatt of capacity over a 24-hour period. It also sets a $175-per-megawatt per day minimum price.

The 2024 auction saw prices jump from about $29 per megawatt per day to $270 per megawatt per day. That prompted Shapiro to file a complaint with the Federal Energy Regulatory Commission in December.

He claimed the upcoming auction could have tripled energy costs and he criticized PJM for allowing “scant differences in supply to whiplash the market between soaring and cratering prices.” The system is designed to incentivize new suppliers to join the market as needed by offering higher prices.

The 38-page order from the federal regulatory commission notes the settlement will reduce price volatility, address PJM’s concerns about inadequate capacity and keep auction prices in line with other regional transmission organizations.

“When PJM’s next auction was set to result in historic price increases, I took action to stop this price hike on consumers and defend Pennsylvanians,” Shapiro said in a statement. “My administration worked with [the federal regulatory commission] and PJM to find a path forward that will save Pennsylvanians billions of dollars on their electricity bills. I will continue to work to ensure safe, reliable, and affordable power for Pennsylvanians for the long term.”

The damage from last July’s auction is done, though. In fact, it won’t fully kick in until June.

PJM holds auctions months or years ahead of when the power is needed, so their true impact is not immediately felt.

The upcoming two auctions will influence prices into 2028.

Capacity costs make up a small portion of customers’ bills. Skyrocketing prices at the previous auction resulted in a monthly increase of $10 for the average Duquesne Light Customer and $17 for the average West Penn Power customer, according to the companies.

Utilities make no profit from higher capacity costs and simply pass them along to consumers.