PJM warns of looming capacity shortfall; FERC approves temporary price limits for this year’s auctions

Jason Stanek, director at PJM Interconnection, told the Pennsylvania House Consumer Protection, Technology and Utilities Committee that the regional grid operator is facing a “mounting crisis” in resource adequacy as demand climbs and dependable generation retires. He said the issue is driving upward pressure on prices for Pennsylvania ratepayers and that steps taken by PJM and regulators aim to blunt near-term cost spikes.

Stanek told committee members that PJM operates the high‑voltage grid serving roughly “more than 65,000,000” people across parts of 13 states and the District of Columbia and that the operator values resources “differently based on their performance and their cost effectiveness.” He said a recent capacity auction produced an RTO clearing price of $270 per megawatt‑day in most zones after a prior clearing near $29 per megawatt‑day, a roughly ninefold increase that PJM attributes to shrinking supply and accelerating demand growth.

The rise in demand, Stanek said, is driven in large part by new large loads — “data centers coming online … almost on a weekly basis” — along with electrification of buildings and transportation. He warned that under an extreme summer scenario PJM could fall short of its reserve margin for the first time and noted that the North American Electric Reliability Corporation (NERC) currently lists PJM as at “elevated risk” for shortfalls during extreme conditions.

To limit market uncertainty while longer‑term solutions are developed, Stanek said PJM entered confidential discussions with Pennsylvania’s governor and other states and that the Federal Energy Regulatory Commission approved a settlement that imposes temporary price bounds for two upcoming capacity auctions. “The price cap that generators could earn would not be above $325 a megawatt day,” Stanek said, and the settlement also sets a floor of $175 per megawatt day; he said those terms apply only to the July and December auctions this year.

Stanek described PJM’s Reliability Resource Initiative (RRI), a one‑time mechanism approved by FERC in March to accelerate certain projects in the interconnection queue. PJM selected 51 projects to advance under the RRI, which Stanek said will add about 10 gigawatts of capacity by 2030 (roughly 90% by 2030 and the remainder by 2031). Pennsylvania, he said, won seven awards totaling about 1,200 megawatts; PJM did not disclose developer identities.

Committee members pressed Stanek on near‑term impacts and PJM’s role. Rep. Rinkovich asked how PJM would address a price shock she said would translate into a 29% increase on ratepayers’ bills; Stanek confirmed the settlement applies to the next two auctions and reiterated that bringing new capacity online takes time, estimating roughly five years for a new natural‑gas combined‑cycle plant and saying the RRI projects are expected to be “online by 2030.”

Several members asked why many projects in the interconnection queue are solar and storage while the RRI awards included relatively more thermal projects. Stanek said the queue contains roughly 67,000 megawatts of proposed projects PJM is reviewing and that roughly half of proposed new capacity nationwide is solar, with storage and hybrid resources growing; he emphasized that PJM assigns capacity “performance ratings” that reflect expected output in stressed conditions (he cited example ratings such as 95% for nuclear and about 9% for fixed‑tilt solar) and that the RRI selection used a methodology weighing location, deliverability and speed of construction.

Stanek also flagged non‑technical constraints that slow projects after PJM approves them: permitting and siting, financing with current interest rates, supply‑chain issues and tariffs. He said PJM is working to speed interconnection processing — including automation work with Google to shorten administrative steps — and has proposed tariff changes to allow retiring resources to transfer interconnection rights to replacement projects without re‑entering the back of the queue, subject to FERC approval.

The testimony left committee members focused on near‑term consumer impacts. Rep. Rinkovich said reliance on future projects “five years from now” does not relieve immediate pressure on ratepayers. Stanek answered that PJM can operate the market and change certain rules but cannot itself directly build generation; he urged states to consider siting and permitting reforms and to avoid policies that would “push any existing generation off the system until we have an adequate quantity of replacement generation.”

The committee adjourned after the Q&A; PJM’s next capacity auctions are scheduled in July and December, and members indicated they may seek follow‑up briefings on the RRI awards and on the status of projects that have exited PJM’s queue.