Rising Electricity Costs in the PJM Region
/What You Need to Know and How to Prepare
Electricity prices across the PJM Interconnection are steadily rising, with a significant jump expected in June. PJM is one of the largest electricity grids in the U.S., serving 13 states and Washington, D.C.
Several factors are driving this increase. These factors include aging grid infrastructure, volatile fuel costs (particularly natural gas), retirement of older uneconomical generation facilities, rising energy demand due to the significant energy needed to power servers for AI (artificial intelligence) and Bitcoin. Regulatory shifts and the length of time to get new generation plants approved and built are adding further pressure.
While these changes are crucial for a sustainable future, they are creating immediate cost pressures that affect every energy user on the grid.
These issues will unfortunately contribute to a perfect storm, effectively reducing the peak load capacity in the electric grid while there is exponential growth in the need for capacity. The scarcity of new resources has impacted the electricity futures markets and will lead to significantly increased prices even if you have a fixed long-term contract. Large commercial users that are on direct high tension (HT) rates (peak demand over 500 kW, with their own step-down transformers) may be impacted slightly less than General service users (monthly peak demand less than 500 kW.
Here is what we expect to happen throughout Pennsylvania:
Starting June 1, 2025, a new surcharge for peak load contribution will be charged to all commercial customers. It will likely be based on the average of the 5 days with the highest demand from the prior year, summer of 2024, and though it will be a kW charge, it will be rolled into the kWh Generation charge, even if you have a fixed price contract for generation/supply.
The impact will be especially critical for commercial building owners, municipal governments, and educational institutions, particularly K–12 schools, who are already managing higher energy prices and tighter operating budgets. With summer peak demand season already here, utility bills are set to spike.
How much can you expect your cost to go up on June 1? The consensus appears to be 15% or more.
Beat the Energy Hike — Take Charge of Your Power Costs
Is there anything you can do to minimize the energy cost impact? There is, but you need to implement some strategies before the first hot and humid days this summer. Why? Because you will be setting your kW peak in summer 2025 (June 1 through September 30), and this will serve as a basis for your next generation charge that you will be billed starting October 1. While many of these strategies are lower cost operational changes, you need to pay attention and actively manage your building(s) as a first step, especially on hot humid days.
There are also capital investments that you can make to reduce both peak demand and consumption, and equipment that can help you shift load from daily peak load period to off-hours when more capacity is available on the grid.
On the bright side, if you can call it that, with energy bills rising, the return on investment that can be realized by investing in the energy performance of your buildings will make energy projects significantly more cost effective with shorter payback periods.
Control Energy Costs Before They Control Your Bottom Line
Your best first step is to quantify the energy cost increases you’ve already seen in the past 6 months and review your June and July electricity bills with your energy consultant, to get a handle on how the price increases have already impacted you, and to lay out a path to reducing energy costs.
Don’t wait for your rates to rise before acting!
FOR MORE INFORMATION
Marika Selzler Williams | Manager, Energy and Sustainability Services | marika.selzler@ssmgroup.com