PJM, the regional electric grid operator, has agreed to a price cap and price floor for its forthcoming capacity auction. PJM’s capacity auction procures enough power generation for the regional grid through competitive auctions.

Tight electric supply and demand yields higher prices to attract investment in generation, while low prices show an oversupply. However, the recent high prices, set to hit customers this summer, procured no additional connected power capacity. Instead, the high prices reflected questionable rule changes in PJM’s auction, benefitting incumbent generators.

The prospect of even higher prices with little benefit led to a formal complaint from Pennsylvania, which in turn led to the agreement with PJM to collar pricing with a cap and a floor. PJM’s proposed settlement still needs to be approved by its stakeholders, its board, and the Federal Energy Regulatory Commission. 2/3/2025