Electricity bills are going up in the Philly region. Who’s in charge of the grid, anyway?

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Electricity bills are rising across the mid-Atlantic.

One reason is that the regional grid operator’s costs of ensuring there will be enough electricity to meet demand in the future are skyrocketing. This news has thrust the grid operator — a little-known entity called PJM Interconnection — into the spotlight.

Here’s what you need to know about the organization that runs the grid.

How does electricity reach my home?

To keep your refrigerator running and your lights on, you probably pay a monthly bill to an electric utility. But the company listed on your bill is likely not where your electricity comes from.

In Delaware, New Jersey and Pennsylvania, regulated utilities such as PECO, Delmarva Power and PSE&G are prohibited from owning the power plants that actually produce electricity. Instead, these utilities buy electricity that’s sold on a wholesale market run by the regional grid operator, PJM Interconnection.

PJM, a nonprofit based in Montgomery County, Pennsylvania, is the largest regional grid operator in the United States. Its territory covers more than 67 million people in 13 states — from Pennsylvania, Delaware and New Jersey south to part of North Carolina and west to part of Illinois. Three utilities formed PJM in the 1920s as a way to share power generation, and it has existed in its current form for more than two decades.

How does PJM operate?

PJM runs a system similar to a stock exchange, said Abe Silverman, an energy consultant and research scholar at Johns Hopkins University who previously worked for NRG Energy, the New Jersey Board of Public Utilities and the Federal Energy Regulatory Commission, or FERC.

“There’s generators on one side — the producers who are producing the electricity,” he said.  “They’re selling it through the PJM market … to utilities who then are selling to end-use consumers.”

In addition to running the power market, PJM acts as the grid’s air traffic controller.

PJM does not own any of the physical grid infrastructure. But the organization makes sure enough electricity travels from power plants through high-voltage lines and substations to the places that need it — without overloading the grid.

“PJM is essentially directing the flow,” said Suzanne Glatz, an energy consultant and former infrastructure planner at PJM. “24/7, hourly, minute-by-minute.”

The primary role of these grid operators is to keep the grid stable and reliable, said Seth Blumsack, a professor of energy policy and economics at Penn State.

“They are the ones that make sure that there’s enough electricity to keep the lights on, on these hot summer days that we have been having,” Blumsack said.

That means planning for infrastructure upgrades and paying power generators to commit to producing enough electricity to meet demand — not just for today but into the future — through what’s known as a capacity auction. 

PJM also controls which sources of energy can produce power for the grid through a process called interconnection. PJM studies the effect that proposed generators, such as coal-fired power plants or solar farms, would have on the grid and any new infrastructure that would be needed to support them, before allowing them to connect.

“Our job is to deliver electricity reliably wherever and whenever it is needed at the lowest reasonable cost,” said PJM spokesperson Jeff Shields.

On the average customer’s electrical bill, roughly half of the cost reflects the local utility’s charges to deliver electricity, energy consultant Abe Silverman said. The other half is related to the cost of the electricity itself, which is driven by PJM’s markets and the interconnection process.

“All of [PJM’s functions] really are contributing to the price impact,” he said.

Why some governors say PJM’s management hurts customers and the region

Electricity demand on PJM’s grid is surging, driven mostly by the growth of data centers — and supply is not expanding fast enough to keep up.

A bipartisan group of governors in the PJM region says the grid operator is failing to respond fast enough to this rising demand and driving household electricity bills up.

In a letter sent earlier this summer, nine governors accused PJM of failing to adequately plan for the grid’s long-term infrastructure needs and to efficiently connect new power sources to the grid — depriving the states of “thousands of jobs and billions of dollars in investment that may flow to other regions.”

“Now these deficiencies threaten the bedrock reliability and affordability our consumers expect and deserve,” they wrote.

The governors want a bigger say in the decision PJM makes and are asking to choose two of the organization’s board members.

Issues with bringing new power sources online

The task of hooking up new generators to the grid has “bedeviled” PJM for years, Silverman said.

“This is a process that should take two years, maybe three at the outside,” he said. “Instead, it’s been taking PJM five, six, seven years.”

The capacity auction PJM uses to guarantee power generators will produce enough electricity  in the future has cleared at record prices the past two years, the costs of which are ultimately passed along to consumers.

Electricity bills will likely rise 1.5% to 5% for most customers in the PJM region as a result of the most recent auction, PJM said. That’s on top of bill increases still going into effect from the prior year.

The higher prices should entice developers to build new power plants, which could bring prices back down. But because of the backlog in PJM’s interconnection process, this market signal isn’t working, Silverman said.

“It almost doesn’t matter how high the price that PJM sends is,” Silverman said. “The investors are still reluctant to come into PJM, or simply can’t.”

PJM has been working to approve new generation projects faster. It has made several reforms to its interconnection process in recent years, including analyzing projects in batches rather than individually, prioritizing projects that can come online fastest and using artificial intelligence to streamline the process.

As of June, 46,000 megawatts worth of projects — enough to power roughly 40 million homes at full output — had recently been approved by PJM for interconnection and were under construction or waiting to start construction, Shields said.

Another 63,000 megawatts worth of proposed projects were waiting to be cleared from PJM’s interconnection queue over the next two years, Shields said. Most of these projects would be solar, wind or battery.

Who is PJM accountable to?

While PJM’s policies affect household electricity bills, individuals have little direct influence over PJM.

The organization needs approval from the Federal Energy Regulatory Commission to make any major changes to how it operates, Shields said.

PJM is governed by a 10-member board, which must include members with experience in corporate leadership, utilities, grid systems and commercial markets. Board members can’t have a financial stake in a company that participates in PJM’s markets.

But energy companies within PJM’s territory can still help shape its decisions, by paying a yearly fee of $5,000 to become members. Over the past year, members have voted on changes to policies such as how much notice retiring power plants must give PJM and the hours in which customers can be paid to reduce their electricity use, Shields said. PJM’s hundreds of member companies include Exelon, which owns PECO, Talen Energy, which owns a natural gas-fired power plant in Camden, and big energy users like Land O’Lakes.

Individual customers have several avenues to get involved. They are represented in these member votes by a coalition of state consumer advocates. Individuals can also comment during PJM’s public meetings, or file complaints directly with FERC.

Individuals can also band together and file complaints as advocacy organizations, such as the Sierra Club, which last year challenged PJM’s capacity auction rules, claiming they artificially elevate prices for consumers.

If you want to have a say in the way PJM runs the grid, Glatz recommends reaching out to your state’s consumer advocate.

“It’s very complicated for an individual to weigh in on any type of utility-type issue,” Glatz said. “That’s why we have things like state commissions, consumer advocates, rate advocates. So it’s really their job to look out for the individual consumer.”

Utility customers’ interests are also represented by a group of state regulators, which can’t vote on PJM policies like companies can, but meet regularly with PJM staff, Shields said.

Ultimately, PJM is accountable to federal regulators, Shields said, “and by extension, ratepayers, members and other stakeholders, including states.”

Still, interest groups such as grid infrastructure owners and power generators tend to have more influence than residential electricity customers or states do over PJM decisions, Silverman said.

“There are a few different ways that you can make your voice heard,” he said. “But at the end of the day, you probably aren’t going to have a vote. And I think that’s what a lot of people find very frustrating.”