Our PJM capacity charges are too high. What can a business do?
PJM capacity prices went from $28.92 to $329.17 per MW-day in two years and have cleared at the price cap three times since. The price is out of your hands. The quantity you are charged for is not.
A business's PJM capacity charge is its peak load contribution (PLC, also called the capacity tag) times the capacity price for the delivery year. The price is set by PJM's auction; the PLC is set by the account's own demand during a few summer peak hours. A business can lower the charge by checking that its PLC is calculated correctly, cutting load in the peak hours that set next year's tag, enrolling in demand response, choosing a contract that passes the capacity cost through at its real tag, and adding on-site storage or generation. Discovery Energy Utility Audits audits capacity tags and buys electricity with capacity terms written around them.
01 / 05
Why capacity charges rose so fast
PJM buys capacity, the promise of power plants and demand response to be available at peak, in an auction held about three years ahead. Every account in the region pays its share. For years the price was low; it no longer is.
| Delivery year | Price per MW-day | Note |
|---|---|---|
| 2024/2025 | $28.92 | Before the run-up |
| 2026/2027 | $329.17 | At the cap agreed for the collar |
| 2027/2028 | $333.44 | At the cap |
| 2028/2029 | $325.00 | At the cap; 6,831 MW short of the reliability requirement |
The 2028/2029 auction, held in July 2026, was the third in a row to clear at the cap. PJM's simulation without the price collar would have cleared far higher, and FERC has extended the collar through the 2029/2030 auction, scheduled for December 2026. PJM's Independent Market Monitor attributes about $6.3 billion, or 38%, of the $16.4 billion cost of the 2028/2029 auction to data center load, and $29.4 billion across the last four auctions. Discovery's data centers and electricity prices briefing covers what that means region by region.
02 / 05
How your capacity charge is calculated
Each June 1, the utility assigns every account a peak load contribution for the coming delivery year. In most PJM zones it is based on the account's demand during the five highest-load hours of the previous summer (the 5CP), adjusted by the utility's scaling and loss factors; some utilities use their own system peaks, and the tariff sets the method. The capacity cost is then:
PLC (MW) × capacity price ($ per MW-day) × days in the billing period
Illustrative example, not a client result
A plant with a 2.0 MW PLC pays about $240,294 of capacity in the 2026/27 delivery year at $329.17 per MW-day ($658 a day), before the utility's adjustment factors. At the 2024/25 price of $28.92 it would have paid about $21,112. Cutting the PLC by 0.5 MW, by reducing load in five summer hours, saves about $60,074 a year at the 2026/27 price.
Transmission works in a similar way in much of PJM, through a network service peak load (NSPL) set from the zone's single summer peak, so the same peak hours often drive two charges.
03 / 05
Seven things a business can do
Check the tag
Compare each account's PLC with its own interval data for the peak hours. Meter multiplier errors, wrong loss factors, estimated reads in peak hours and closed or merged accounts can all inflate a tag. A wrong tag also inflates every capacity charge the supplier passes through. See capacity tag errors.
Cut load in the peak hours
The five peak hours are not known in advance, but they fall on the hottest summer weekday afternoons. A peak alert service and a curtailment plan (shifting production, pre-cooling, pausing non-critical loads) can lower next year's tag. Every MW avoided saves about $119,000 to $122,000 a year at recent prices.
Enroll in demand response
Through a curtailment service provider, a site can be paid to reduce load when PJM calls for it. Demand response made up about 5% of the capacity secured in the 2028/2029 auction. Check how enrollment interacts with your own tag reduction plan so you are not paid for the same MW twice in a way your contract forbids.
Choose how capacity is priced in your contract
In an all-in fixed contract, the supplier prices your tag at signing and keeps the risk, at a premium. With capacity passed through at cost, a lower tag flows straight to your bill. If you plan to manage peaks, a pass-through usually pays you for it; if you cannot, fixing it may be safer. See fixed with pass-throughs.
Read the change-in-law and capacity clauses
Some fixed contracts allow the supplier to pass through capacity costs above an assumed price, or new market charges. Know which yours does before the next auction result.
Look at storage and on-site generation
A battery or generator that runs only in likely peak hours can cut the tag for a few hours of use a year. At current capacity prices the payback is shorter than it was. Check interconnection, air permit and utility standby rules first.
Time your next purchase
Capacity prices for delivery years already auctioned are known; later years carry the collar through 2029/2030. Discovery's Energy Risk Report tracks both, and a term that runs past the collar should be priced knowing the cap may not last.
04 / 05
State by state
How capacity reaches the bill differs by utility and state program. Discovery's briefings cover the main PJM states: Illinois and ComEd, New Jersey, Pennsylvania, Ohio, Maryland, Virginia and Indiana. The overview of PJM prices and industrial budgets explains why the bill has to be understood before it can be fixed.
05 / 05
Questions about PJM capacity charges
Our PJM capacity charges are too high. What can a business do?
Check that the peak load contribution is right, reduce load in the summer peak hours that set next year's tag, enroll in demand response, choose a contract that passes capacity through at your real tag if you can manage peaks, and consider storage or on-site generation for peak hours.
What is a peak load contribution?
The share of PJM's peak demand assigned to your account for a delivery year, usually from your demand in the five highest-load summer hours of the year before, adjusted by the utility's factors. It is shown on many supplier bills and in utility data.
Why did my capacity charge go up when we used less electricity?
Because the charge follows your demand in a few peak hours and the auction price, not your total usage. The price rose more than tenfold between 2024/25 and 2026/27.
When does the capacity tag change?
Each June 1, with the new delivery year, based on the previous summer's peaks.
Can a capacity tag be wrong?
Yes. Meter multiplier errors, wrong loss factors, estimated peak-hour reads and account changes can all inflate it, and the error repeats in every bill for the year. An audit checks the tag against interval data.
Sources
- PJM, 2026/2027 Base Residual Auction Report, $28.92 per MW-day for 2024/25 and $329.17 for 2026/27.
- PJM, Review of 2027/2028 Base Residual Auction results, $333.44 per MW-day.
- PJM, Capacity auction procures 138,318 MW of generation resources (July 14, 2026), $325 per MW-day cap, 6,831 MW shortfall, 2029/2030 auction in December.
- OPIS, PJM's 2028/2029 capacity auction clears at price cap for third time, resource mix including 5% demand response.
- Enel North America, PJM 2028/2029 capacity auction results, FERC approval in April 2026 extending the collar to the 2028/2029 and 2029/2030 auctions.
- BTW Media, PJM monitor attributes $6.3bn of auction charges to data centres, Monitoring Analytics estimates of 38% and $29.4 billion across four auctions.
Find out what your bills should have cost.
Send one recent bill per site, or a list of accounts. We tell you where we expect findings before you sign anything. No upfront audit fee.