Market Alert: PJM's Auction Increases Capacity Prices by Another 22%

Late last summer, many were shocked by the outcome of PJM’s long-delayed capacity market auction. Most zones cleared at approximately $270/MW-day for the current planning year, which began on June 1, 2025 and runs through May 2026. The next auction, covering the planning year from June 2026 to May 2027, was originally scheduled to take place in December 2024. However, the $270/MW-day clearing price from last summer's auction, combined with predictions from many analysts that the next auction price could double, prompted Pennsylvania Governor Shapiro and others to negotiate a deal with PJM. That final deal set an estimated floor price of approximately $175/MW-day and a ceiling price of $325/MW-day for the next two auctions.

The first auction with a floor and ceiling cap took place from July 9-15, 2025. All Locational Deliverability Areas (LDAs) cleared where most analysts had predicted, at the agreed upon final ceiling price of $329/MW-day. Figure 1 shows this clearing price in four major PJM LDAs. This is an increase of about 22% over the current $270/MW-day for planning year 2025/26 and represents a $16.1 billion total cost for capacity across the market, an increase from $14.7 billion in the previous auction.

Figure 1: PJM Capacity Clearing Prices by Delivery Year for Major LDAs, www.pjm.com

For a quick overview, PJM has a helpful 2-page summary highlighting key details from the auction. For a more in-depth look, you can read PJM’s full 20-page report here. Governor Shapiro’s press release is also available at this link.

To help make sense of what this all means, we’ve answered some of the most common questions that have come up over the past week:

Question #1: How will this impact my bill?

If your invoice has a separate line item for capacity, most utility zones will show an increase of approximately 22%. If you have any questions, please contact your 5 Energy Advisor. They can assist you with a more specific impact analysis for your exact situation and utility.

Question #2: Did the ceiling cap deal actually help?

Yes, it did. Page 19 of PJM's full report shows the price without the ceiling cap would have cleared at $389/MW-day, a total market value of $19 billion. Thanks to the cap, the deal led to $2.9 billion in annual market savings.

Question #3: I thought the ceiling was $325/MW-day, how did it clear at $329/MW-day?

The agreed-upon price cap was $256.75 for ICAP (Installed Capacity), which is the market price paid to generators. However, customers actually pay the UCAP price (Unforced Capacity), which adjusts ICAP to account for the likelihood that some generators may not be available when needed. UCAP was initially estimated to be around $325 based on preliminary adjustment factors. Final adjustments were only slightly different, resulting in a price about 1% higher than estimated, but still within expected ranges.

Question #4: What does this mean for future auctions?

The next auction, for the planning year June 2027 – May 2028, is scheduled for December 17, 2025, and the current floor/ceiling agreement will remain in effect for this next auction. Given the reality of demand increases combined with minimal additional generation resources, it is very likely that this auction clears at the same ceiling price.

Question #5: Will there be additional floor/ceilings after this coming auction?

This question touches on a complex mix of political and economic pressures. While it's very likely that new price ceilings and floors will be negotiated before the May 2026 auction for the 2028/29 planning year, we don’t expect the ceiling price to be significantly reduced, if it changes at all.