NEW YORK (Reuters) – Pennsylvania Governor Josh Shapiro lodged a formal complaint with a federal energy regulator against PJM Interconnection on Monday, contending that the largest U.S. power grid operator must revise its market regulations to prevent a surge in electricity costs.
PJM Interconnection, responsible for managing the electrical grid serving over 65 million Americans in parts of 13 states from Illinois to New Jersey, has come under scrutiny following its announcement in July that its annual capacity auction would lead to record-high payments to power plants within its network.
“It appears evident that PJM’s capacity market is currently not functioning effectively,” Shapiro, a Democrat, and the Commonwealth of Pennsylvania stated in the complaint submitted to the Federal Energy Regulatory Commission.
The complaint argues that PJM’s capacity market price cap is unreasonably high and poses a risk of escalating electricity costs without a significant improvement in grid reliability. If certain market rules remain unchanged, consumers across the PJM region could face up to a $20.4 billion increase in expenses, as per the complaint.
In the latest annual auction, PJM agreed to pay power producers nearly 900% more than the previous year, citing tightening power supplies and growing electricity demand as reasons for the steep price hikes.
Some of these increased costs will ultimately be borne by households and businesses within PJM’s jurisdiction.
“At its core, this issue stems from a supply and demand imbalance that is driving up consumer prices, largely due to policy decisions leading to the removal of resources from the system, alongside the growth in data center and electrification demand,” remarked PJM spokesperson Susan Buehler.