PJM Capacity Prices Hit $333 per Megawatt-Day as Data Centers Drive 40 Percent of the Bill
Commercial Property Owners in 13 States Face New NOI Math as June 2027 Delivery Year Approaches
By Keith Reynolds | Publisher & Editor, ChargedUp!
The December 2025 PJM capacity auction cleared at the FERC-approved cap of $333.44 per megawatt-day for the 2027 to 2028 delivery year. That clearing price is roughly 11 times what the same auction produced two years earlier, and it is the third consecutive auction to hit the ceiling. The total cleared value of $16.4 billion will begin flowing through utility bills across the PJM footprint on June 1, 2027. PJM cleared 134,479 megawatts of generation capacity, which sounds like a lot until it is compared against the reliability requirement. The grid operator came in 6,623 megawatts short of its installed reserve margin for the first time ever.
The PJM independent market monitor, Monitoring Analytics, calculates that data center load accounts for roughly $6.5 billion of the $16.4 billion in cleared costs. That is 40 percent of the bill. The demand forecast for the 2027 to 2028 delivery year rose by 5,250 megawatts compared with the prior year's auction, and PJM confirmed that nearly 5,100 megawatts of that increase is attributable to data center demand. Without the temporary price cap negotiated between Pennsylvania Governor Josh Shapiro and PJM in 2024, the auction would have cleared at approximately $530 per megawatt-day, roughly 60 percent higher. Cumulative cost to ratepayers through 2033 could reach $100 billion to $163 billion depending on whether the cap mechanism is extended, according to analysis from the Institute for Energy Economics and Financial Analysis.
Why Property Owners in 13 States Should Read This Line Item
Owners in Pennsylvania, Virginia, Maryland, New Jersey, Delaware, West Virginia, Ohio, Illinois, Indiana, Kentucky, North Carolina, the District of Columbia, and Michigan are absorbing this capacity cost directly through the rate cases hitting this summer. PECO filed a $429 million hike with the Pennsylvania Public Utility Commission on March 30. PPL settled at $275 million with distribution rates frozen until 2028. Xcel Energy Colorado, operating outside PJM but facing similar supply pressure, is seeking $356 million with a 9.9 percent residential increase. The Center for American Progress rate-case tracker now counts 242 utilities with rate increases affecting 111.5 million customers nationwide.
PJM's own estimate is that the auction adds approximately $70 per month to the average PJM family's electricity bill by 2028. For a 300-unit multifamily asset in the PJM footprint, that is a $252,000 annual increase in aggregate household energy cost flowing through the local economy. For an office building where the owner absorbs utility expense, the math is more direct. Energy already represents roughly one-third of total operating expenses in a typical commercial office, and a 15 to 25 percent increase in the electricity line is the difference between a stable NOI year and a cap rate expansion conversation with lenders.
The critical underwriting question is no longer whether rates are going up. The question is whether the asset can hedge. Behind-the-meter solar paired with battery storage at the building level is the cleanest structural response, because it converts a floating cost exposure into a fixed capital investment backed by a 30 percent Investment Tax Credit under Section 48E and restored 100 percent bonus depreciation for property acquired after January 19, 2025. The Section 179D deduction, now reaching up to $5.94 per square foot for qualifying projects, sunsets for construction starting after June 30, 2026. The window for locking in these incentives is 10 weeks from publication date.
The Planner's View of the Same Line Item
For planners, PJM's capacity auction is also a housing affordability event. An additional $70 per month on a household bill is a direct pressure on household budgets in a region already struggling with affordable housing supply. The political response will run through rate cases, consumer advocates, and state legislatures long before it runs through land use, but the siting decisions made now at the planning level determine whether new load concentrates in jurisdictions that already have the grid capacity to absorb it or in jurisdictions where the utility will rebuild the local grid and pass the cost through to every connected ratepayer. That cost-allocation question is structurally connected to the second and third feature stories in this issue.
The forward signal to watch is the July 2026 PJM auction. That auction, for the 2028 to 2029 delivery year, is not currently scheduled to include the temporary price cap. Several industry observers expect the cap to be reinstated before July, but if it is not, the cleared price could move substantially higher than $333. The delivery year begins June 1, 2028, which means the pass-through begins exactly 14 months after the auction.
ChargedUp! published a deeper treatment of how distributed energy and on-site generation interact with NOI and cap rates in the April 15 white paper on the energy-equity connection. The rate-case data summarized above is the near-term mechanism by which that structural thesis arrives at the property level.
Sources and Further Reading
ChargedUp! white paper, "The Energy-Equity Connection" (April 15, 2026) https://chargeduppro.com/post/energy-equity-connection-distributed-energy-noi-cap-rates-cre-2026
IEEFA, "Projected data center growth spurs PJM capacity prices by factor of 10" https://ieefa.org/resources/projected-data-center-growth-spurs-pjm-capacity-prices-factor-10
PJM Inside Lines, "PJM Auction Procures 134,479 MW of Generation Resources" https://insidelines.pjm.com/pjm-auction-procures-134479-mw-of-generation-resources/
PJM, 2027/2028 Base Residual Auction Results press release (December 17, 2025) https://www.pjm.com/-/media/DotCom/about-pjm/newsroom/2025-releases/20251217-pjm-auction-procures-134479-mw-of-generation-resources.pdf
Utility Dive, "PJM capacity prices hit record high as grid operator falls short of reliability target" https://www.utilitydive.com/news/pjm-interconnection-capacity-auction-data-center/808264/
Utility Dive, PECO rate case coverage https://www.utilitydive.com/news/peco-energy-rate-hike-puc/816302/
