PJM Interconnection, largest US grid operator, signals power capacity prices to hit regulatory price cap as AI data-center load surges.
The largest electrical grid operator in the U.S. is facing a significant cost crisis driven by soaring demand from data centers. PJM, which serves 13 states and Washington, D.C., announced that electricity prices will jump more than 60% amid insatiable demand from data centers outpacing supply growth.
"Demand for electricity continues to grow faster than electricity supply," PJM CEO David Mills said in a statement accompanying the results of an annual auction that sets power prices two years in advance.
In its latest auction, PJM recorded a $16.4 billion closing bid for electricity beginning in June 2028, matching a record set in late 2024. However, the auction failed for the third consecutive time to secure sufficient future supply commitments to ensure grid reliability in the years ahead.
The impact of data center development has been particularly severe. According to Monitoring Analytics, the grid's independent market monitor, data center demand has increased PJM power supply costs by more than 60%. This burden means PJM will need to raise nearly $30 billion from ratepayers to maintain grid operations, according to Monitoring Analytics President Joseph Bowring. Even with additional capacity additions, PJM faces a shortfall of approximately 6.8 gigawatts—roughly equivalent to seven nuclear reactors—during peak demand periods.
"This is not an acceptable way to go forward," Bowring told Bloomberg, calling for a separate auction mechanism specifically for data center demand to better manage the resulting price pressures. While the shortage does not mean PJM cannot meet electricity demand, it will require operating with reduced power reserves and elevated operational risk.
The cost burden has accumulated rapidly. Since 2024, PJM's auctions have generated about $29 billion in additional costs distributed across all utility customers. In the most recent auction, data centers accounted for approximately $6.3 billion of the $16.4 billion total. Individual ratepayers would have faced even steeper increases, but pricing was capped under an agreement negotiated in 2024 following a lawsuit by Pennsylvania Governor Josh Shapiro against the utility over rising rates.
Shapiro and other state lawmakers have criticized PJM for moving too slowly to add generation capacity, including renewable energy solutions that could reduce costs. The Natural Resources Defense Council echoed these concerns, with climate and energy advocate Claire Lang-Ree stating: "This year's auction confirms an unacceptable trend: data center load growth is outpacing new electricity supply. Only 524 megawatts of new power plants joined PJM for this auction, proving that new supply simply can't keep up with the pace of data center load growth, and everyone is paying the price."
In response, PJM has adjusted its operational and regulatory approach. The utility moved its power auction to September to accelerate data center grid connections this year and requested regulatory approval in March to modify rules making it easier for operators to generate their own electricity. PJM serves customers in New Jersey, Pennsylvania, Delaware, Maryland, Virginia, West Virginia, North Carolina, Tennessee, Kentucky, Ohio, Indiana, Illinois, Michigan and Washington, D.C.