The Capacity Squeeze, Part 1: How PJM Capacity Prices Rose 833 Percent and Why They Are Not Coming Down

The Belden Brick Company has been making brick in Sugarcreek, Ohio for 141 years, five generations of the same family. In 2025, the capacity charge on its electric bill went from about $1,600 a month to about $12,000 a month, as Reuters reported in July.

Nothing changed inside that plant. What changed was a single number set at an annual auction most manufacturers have never heard of: the price PJM Interconnection pays generators to guarantee power will be there at peak demand. That number rose 833 percent in one year, and it has not come back down. This article is the full story, told for the people who pay for it.

What Happened to PJM Capacity Prices?

PJM's capacity price rose from $28.92 per megawatt-day for the 2024/25 delivery year to $269.92 for 2025/26, an 833 percent increase in a single auction. The three auctions since have all cleared at the price cap: $329.17 for 2026/27, $333.44 for 2027/28, and $325.00 for 2028/29.

The most recent result came on July 14, 2026, when PJM announced that its 2028/29 Base Residual Auction procured 138,318 MW of capacity at $325 per megawatt-day, the ceiling set in coordination with the governors of all 13 PJM states and the Federal Energy Regulatory Commission. The price is technically a 2.5 percent decrease from the prior year. That is not relief. It is the sound of an auction pressing against its lid for the third consecutive time.

What Is a Capacity Charge, and Why Does Your Facility Pay It?

A capacity charge is the price of guaranteed availability. PJM, the regional transmission organization (RTO) that operates the grid for 13 states and Washington D.C., runs an annual auction that pays generators to promise their output will be available during the highest-demand hours of a future delivery year. Utilities and competitive suppliers pass that cost through to every customer, and commercial accounts pay it through capacity-related supply charges tied to their peak usage.

The reason manufacturers feel it more than almost anyone: exposure scales with how much power you draw and when you draw it. Electricity runs roughly 10 percent of a typical residential bill but up to three times that share of costs for a manufacturer, according to Reuters. On a demand-metered industrial account, the capacity obligation is set largely by the facility's draw during a handful of the grid's highest-demand hours of the prior summer. A plant running full shifts through a July afternoon is buying capacity at whatever the auction cleared, whether or not anyone in the building has ever read a PJM auction report.

We covered how these charges flow into northern Illinois bills specifically in our piece on rising Illinois commercial electricity costs. This article is about the machine behind those line items.

Why Did the Price Jump 833 Percent in One Auction?

Because demand started growing again just as supply stopped keeping up. Data center construction and broader electrification pushed PJM's load forecast upward while older plants retired faster than new generation came online. The reserve margin, the cushion between available supply and expected peak, fell from 21.7 percent to 18.6 percent in one year, and a tighter market priced accordingly.

For two decades PJM had more generation than it needed, and capacity was cheap. A manufacturer could ignore it because it rounded to noise. That surplus is gone. By the 2027/28 auction the reserve margin had fallen to 14.4 percent, and the auction failed to procure enough capacity to meet PJM's reliability requirement for the first time. The 2028/29 auction missed the requirement again, by 6,831 MW, even with every price signal in the market screaming for new supply.

The demand side of the squeeze has a name. Monitoring Analytics, PJM's independent market monitor, attributes $6.3 billion of the $16.4 billion in 2028/29 auction charges, about 38 percent, to data center load. Across the last four auctions, the monitor puts data-center-related capacity charges at nearly half of the $63.6 billion in total charges. Who ends up paying for that growth is a big enough question that it gets its own article in this series.

The supply side is the quieter half of the story, and the more stubborn one. Of the 138,318 MW that cleared the 2028/29 auction, only 525 MW was new generation and uprates. Everything else was existing supply repricing at the cap. New plants face multi-year interconnection queues and long equipment lead times, which means the shortage cannot fix itself quickly no matter what the price does.

What Does This Look Like Inside a Real Plant?

Belden Brick's monthly capacity charge went from about $1,600 to about $12,000. Plaskolite, a plastics manufacturer with Pennsylvania and Ohio facilities, saw capacity charges across its plants go from roughly $200,000 to $1.2 million a year. Both are documented in Reuters' July 2026 report on Rust Belt factories and data center growth, where company president Brad Belden said the charge "just jumped off the page."

Those are not businesses that made a bad energy decision. They are businesses that stood still while one line item on the bill multiplied by seven. Capacity is uniquely frustrating that way. You cannot negotiate it away, because every competitive supplier embeds the same auction price in its offers. The charge simply arrives, sized to your facility's peak draw, priced at an auction you had no seat at.

The physical grid behind the prices is telling the same story. During the late-June 2026 heat wave, PJM took emergency steps, including asking users to curb consumption, to avoid rolling blackouts as peak demand hit a record, per Reuters. High capacity prices are what scarcity looks like on a bill. A record peak with emergency conservation calls is what it looks like on the ground.

Does Northern Illinois Pay More Than the Rest of PJM?

Not currently, and that surprises people. In the 2025/26 auction the ComEd zone cleared at the system-wide price of $269.92 with no zonal premium, while the BGE zone in Maryland cleared at $466.35 and Dominion in Virginia at $444.26. Northern Illinois has been paying the system price, not a markup.

The forward-looking number is less comfortable. PJM's own simulated auction results show that without the price collar, the 2028/29 market would have cleared at $554.72 per megawatt-day across the footprint, and near $777 in the ComEd zone. Total charges would have been $29.7 billion instead of $16.4 billion. Read that pairing carefully: the zone with the most cap-suppressed price pressure in the entire footprint is the one covering northern Illinois manufacturing. The collar, which is the price cap paired with a matching price floor, was approved by FERC for four auctions in total, the original two plus an extension covering 2028/29 and 2029/30. The December 2026 auction for 2029/2030 is the last of the four, and what replaces the collar after that is an open regulatory question.

What Happens Between Now and December?

Three things are in motion. PJM files its backstop proposals with federal regulators in July. A special backstop procurement is planned for September to bring additional resources forward. And commitments from that process are set to be finalized before the December 9 auction for the 2029/2030 delivery year.

The backstop is worth watching for who is driving it. The winning proposal in PJM's stakeholder process was led by the Data Center Coalition and electric utilities including Exelon, ComEd's parent. In plain terms, the interests that represent the new demand are co-authoring the mechanism for procuring the supply to serve it. Whether that produces a fair split of costs is exactly the question regulators are starting to circle.

Washington is already moving. On June 18, 2026, FERC ordered all six regional grid operators to justify or reform how they connect very large new loads, with answers due in 60 days. The orders explicitly name manufacturing facilities alongside data centers among the loads at issue (dockets EL26-67 through EL26-72). If your company is planning an expansion or a new facility, the rules for getting it connected to the grid are being rewritten right now. Who ends up paying for whose growth is the subject of the next article in this series.

What Can a Manufacturer Actually Control?

You cannot control the auction. You can control the load the auction bills you for. A facility's capacity obligation is set by its draw during the grid's peak hours, which means peak-hour management, demand response participation, and on-site generation paired with storage all shrink the number the market multiplies by whatever price clears. Those levers, with honest tradeoffs, are the final article in this series.

For the mechanics of how batteries specifically attack demand and capacity charges on a ComEd account, our demand-charge and battery payback analysis walks the math. The short version is that the fastest-growing line on the bill is also the one behind-the-meter assets are built to reduce, and the economics improved every time an auction cleared at the cap.

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