Utilities reserve electricity supply years before households and businesses need it. As data-center developers request more power, the cost of those reservations is rising across the region served by PJM, a grid operator covering 13 states and Washington, D.C.
In its December 2025 auction for supply available in 2027 and 2028, PJM reached a federally approved price ceiling of $333.44 per megawatt per day. PJM reported a total annual value of about $16.4 billion. PJM said existing contracts and utilities’ own generation would affect how much customers ultimately paid at that rate. Its announcement attributed nearly 5,100 megawatts of an approximately 5,250-megawatt increase in forecast peak demand to data centers.
Capacity payments compensate suppliers for being ready to produce electricity, or reduce consumption, when a grid operator calls on them. The Federal Energy Regulatory Commission’s explanation distinguishes those commitments from purchases of electricity as it is generated. Utilities and other retail suppliers pay capacity charges, then recover the costs through customers’ bills.
A price affected by buildings still being planned
Monitoring Analytics, PJM’s independent market monitor, recalculated the auction after removing data-center demand from its assumptions. In a January 5 analysis, it estimated that existing and projected data centers increased costs to other PJM customers by about $6.5 billion in that auction and $23.1 billion across the three auctions covering delivery years 2025–26 through 2027–28.
Those are estimates from rerunning the auction under different demand assumptions. The monitor held other conditions constant to examine how data centers affected prices. Its report counted 17,071 megawatts of existing and forecast data-center demand for 2027, including 13,018 megawatts from planned facilities and expected growth at existing ones.
That forecast enters an auction before all the buildings consuming the power exist. Suppliers are paid to commit enough capacity to meet projected demand, so a proposed facility can influence future power costs while its developer is still preparing the site.
PJM had already warned about household costs after its July 2025 auction for the preceding delivery year. It estimated increases of 1.5 to 5 percent in some customers’ total electricity bills, depending on how suppliers and states passed on wholesale charges. In two areas where capacity prices fell, it said customers could instead see lower rates.
The operator also reported new supply: that auction secured 2,669 megawatts from new generators and improvements to existing plants. Seventeen generating units had withdrawn retirement plans since the previous auction. Yet PJM said developers had not built more than 46,000 megawatts of projects already approved for grid connection, citing permitting, supply-chain and financial obstacles.
By the December auction, committed supply fell short of PJM’s reliability target. The operator identified several possible additions, including plants that might postpone retirement and winter-only generators that had not secured annual contracts. It scheduled another auction for February 2027 to adjust commitments closer to the delivery period.
