The Federal Energy Regulatory Commission (FERC) has approved PJM Interconnection’s proposal to implement a temporary price collar for its next two capacity auctions, covering the 2026/27 and 2027/28 delivery years. Replacing the previous cap of approximately $500 and a zero-dollar floor, this collar sets a price cap of $325 per megawatt-day and a floor of $175 per megawatt-day.
The decision follows a complaint filed by Pennsylvania Governor Josh Shapiro in December 2024, expressing concerns over rising electricity costs due to PJM’s capacity auction prices. The last auction cleared at nearly $270/MW-day, a significant increase from the previous $29/MW-day, leading to anticipated bill increases of around 20% for some utilities starting June 1.
While PJM and FERC view the price collar as a balanced approach to provide cost certainty for consumers and revenue predictability for capacity resource owners, the proposal faced opposition from PJM’s market monitor and other stakeholders. Critics argue that such interventions could undermine market signals necessary for long-term investment in the power fleet.
FERC dismissed these concerns, emphasizing that the collar is a time-limited measure addressing current market conditions, including rapid load growth, power plant retirements, and delays in new generation development. Additionally, PJM plans to revise key inputs into its capacity price-setting process and implement interconnection queue reforms later this year.