Last week’s energy auction by multi-state power grid operator PJM will cause monthly electric bills to go up $2 to $5 next summer — but that’s on top of other costs, for transmission, fuel and more, that one advocate calls “death by a thousand cuts.”
It’s also the latest evidence, say ratepayer advocates and policymakers, that policies of PJM, the grid operator in a 13-state region that includes Kentucky, are out of whack.
The latest of the “thousand cuts” is mostly the result of energy-guzzling data centers, David Lapp, the Maryland People’s Counsel, who is charged with representing state ratepayers in that state. Predictions for their proliferation are largely behind inflated projections of energy demand in PJM states, pushing demand past supply in the auction process, sending the price skyward.
And ultimately, consumers pay the price.
“It’s fundamentally unfair,” Lapp said. “Why should residential customers be responsible for costs being driven by some of the biggest and wealthiest corporations in the world?”
At the same time, consumer advocates say PJM policies have restricted supply, with a backlogged queue for energy projects, many of them renewable energy proposals.
“Until there’s actual queue reform, there’s not going to be real relief,” said Emily Scarr, a senior adviser for Maryland PIRG, or Public Interest Research Group.
All eyes were on this year’s auction because last year’s was a blockbuster: The clearing price jumped 800% compared to the 2023 auction, setting a record for the most expensive such auction in PJM history.
This year’s auction surpassed that record, but it was offset by policies that consumer advocates — and some governors — pushed PJM to adopt.
Pennsylvania Gov. Josh Shapiro (D) was behind a new cap on the auction’s clearing price. The auction hit the cap, saving consumers about $2.9 billion in total costs on their bills.
As various parts of energy bills increase, grid decision-makers don’t seem to be asking a key question, says Laurel Peltier, a low-income ratepayer advocate for the AARP: “Can people afford this?”
During a news conference Tuesday, Stu Bresler, a PJM executive vice president of market services and strategy, said that auction costs are a “small part of retail bills, and it also varies” how auction costs translate into rate changes for consumers.
But Peltier said that ignores key context.
“That’s like being in a bakery, and you know that the flour got more expensive, the butter got more expensive, the labor got more expensive, and you’re the egg maker, and your eggs are 800% more, and you’re like, ‘It’s OK. It’s just a little part,’” Peltier said.
Changes inside PJM?
In a July 16 letter to PJM, a bipartisan group of nine governors in PJM’s 13-state territory — including Kentucky Gov. Andy Beshear — said the moment presents an opportunity for change.
With the “abrupt termination of two long-standing members of the Board of Managers and the imminent departure of the CEO,” their replacements must “understand the concerns of ratepayers facing rising costs,” and create “a more collaborative and more effective ethos” at PJM, the governors wrote.
“In the past, other regions looked to join PJM due to its many strengths; today, across the region, discussions of leaving PJM are becoming increasingly common,” read their letter.
In a July 18 response, PJM Board of Managers Chairman David Mills pushed back.
“Our operators are keeping the lights on through some of the most challenging circumstances that any grid operator, anywhere, has faced in its history,” he wrote. “We also continue the necessary function of operating regional markets as well as planning for a grid that is seeing an explosion of demand growth at the same time that state and federal policies have pushed a meaningful amount of generation capacity into retirement.”
He listed a number of changes PJM has made to its auction “to address concerns raised by our states,” including the “temporary” cap.
In a statement announcing the auction results Tuesday, PJM wrote that it “continues to focus on enhancing its process for connecting new generation resources onto the system, which includes clearing all the projects in its transition queue over the next 18 months, opening its new cycle process in spring 2026, and leveraging artificial intelligence through our partnership with Google to reduce processing time.”
Regime change may help, but some advocates warn that more transformative change may be necessary to lower prices. That includes changing how the organization is governed, Lapp said.
“We and the 13 other state consumer advocate offices in PJM — we get one vote. There are transmission-owning utilities that have more votes than us together,” Lapp said. “It’s the transmission owners that wield the most influence at PJM.”
Those same companies generally lose out when more power generation comes online, Scarr said.
“The legacy power plants lose out when that happens — but they’re the ones managing the ship,” Scarr said.
A spokesman for PJM pointed to a fact sheet describing the grid operator’s governance structure, which highlights that PJM’s 10-member Board of Managers must not be financially tied to any PJM member. But on the member’s committee, which includes about 1,000 members, votes are divided between five industry sectors. State consumer advocates are the other voting members.
Data center projections
When he hears projection for data center demand Lapp said he worries they are overblown because technology could be advancing to increase power efficiency at the facilities, which are full of computer servers that require immense amounts of energy to run and to keep from overheating.
That’s a major reason why data centers themselves should be footing the bill for their own power demand, and the upgrades to the power system they may require, Lapp said.
“If the data centers aren’t responsible for paying for all the costs that they are driving, they have much less incentive to find more computer chips, to operate more efficiently, to reduce their own costs,” he said.
It’s PJM’s job to change the paradigm, wherein ratepayers pay for enhancing the electric system, he said.
“It’s an unprecedented period of time in the industry, when you have city-sized demand being built up in just a few years,” Lapp said. “You can’t treat that the same as load growth gradually occurring over time.”
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Written by Christine Condon. Cross-posted from the Kentucky Lantern.
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