Electricity consumers in a large region that includes South Jersey will be avoiding up to an estimated $21 billion in price hikes over the next two years thanks to the recent settlement of a complaint filed with the Federal Energy Regulatory Commission.
The agreement, between Pennsylvania and the PJM Interconnection, a regional electricity transmission organization that covers all or parts of 13 states – including New Jersey – and the District of Columbia, will set a price cap for the next two capacity auctions conducted by PJM.
The complaint, filed by Pennsylvania Gov. Josh Shapiro in December and supported by Gov. Phil Murphy, other governors and advocacy organizations, criticized “flaws in PJM’s capacity auction design that threaten to impose significant new price increases,” according to the Commonwealth of Pennsylvania website.
“Left unaddressed, PJM’s next capacity auction scheduled for July 25 would have resulted in billions in unnecessary energy costs for 65 million people across the region,” the website says.
The agreement, if approved by PJM’s board as expected, lowers PJM’S capacity auction price cap from more than $500/megawatt-day to $325/megawatt-day at its next two auctions – set for this July and July 2026 – leading to the estimated savings.
In July 2024 the result of PJM’s capacity auction to set supply pricing beginning this June shocked officials across the states PJM serves. The auction resulted in a cost to consumers of $14.7 billion, compared to the previous year’s $2.2 billion, according to the Pennsylvania state website and Utility Dive, a newsletter and website that tracks utility industry trends.
On Aug. 1, Exelon, the parent company of Atlantic City Electric, said in a statement that the PJM capacity auction in 2024 “will likely lead to double-digit rate increases that could be much more significant than any one-year increase experienced to date.”
Public outrage following last summer’s extraordinarily high electric bills and the reaction of elected representatives likely had an influence on helping get the complaint settled. In New Jersey, Rep. Jeff Van Drew (R-2) held a field hearing on the bill increases, and there was a state legislative hearing in Trenton.
There was also a great deal of public pressure brought to bear on Atlantic City Electric as the billing entity for consumer electricity use.
Atlantic City Electric controls only the power distribution component of a consumer’s monthly bill. The supply costs come from the PJM auction process and typically amounts to about 40% of the bill, ACE officials say.
In an interview with the Herald, Amber Perry, ACE’s vice president for regulatory strategy, pointed at PJM, saying the grid operator had to speed up electricity interconnection approvals and take steps to maintain plants that are scheduled for decommissioning before replacement energy sources can fill the void.
Much of what Perry spoke to is part of the deal struck with PJM, which agreed to speed up interconnection timelines for the estimated 240 gigawatts of energy in line for connection to the electricity grid, much of it coming from clean energy sources, according to Murphy.
The state Board of Public Utilities praised the agreement, with board President Christine Guhl-Sadovy saying, “While progress has been made, the PJM needs to do more.” New Jersey Rate Counsel Brian Lipman called the agreement a “good step,” adding that more needs to be done to ensure that future energy prices are “reasonable.”
Van Drew called the agreement “a good first step in addressing the burden of rising and unfair electricity costs in our region.”
Contact the reporter, Vince Conti, at vconti@cmcherald.com.
