Pa., N.J. and Del. could see increased risk of power outages due to supply and demand crunch on regional grid

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The mid-Atlantic region’s grid operator is struggling to secure enough electricity to meet the demand projected from data centers in the coming years, as costs for consumers continue to rise.

PJM Interconnection, which runs the grid in Pennsylvania, Delaware, New Jersey and part or all of 10 other states, released results of its latest capacity auction Wednesday. Auction prices reached a record high for the third auction in a row, but remained close to the last auction’s prices, thanks to a price cap of around $333 per megawatt-day negotiated by Pennsylvania Gov. Josh Shapiro to mitigate skyrocketing costs for consumers.

For the first time across the entire grid region, PJM was unable to secure enough promised power to reach its goal, risking blackouts should electricity use outpace supply.

“It’s a little bit scary,” said Abe Silverman, an energy consultant and research scholar at Johns Hopkins University.

“It is a long-term structural deficit where the amount of power — generation supplies, power plants — is way less than the amount of electricity we’re trying to provide to customers, and that is particularly driven by the data centers,” he added.

The organization uses capacity auctions to secure commitments from power producers and large power users to generate or conserve enough electricity to meet demand on the hottest and coldest days in the future, when people use more electricity. This month’s auction determines capacity for the year starting in June 2027.

Although PJM sought a 20% buffer, power commitments totaling just 14.8% over projected peak demand cleared the auction.

PJM’s projection of peak electricity demand for the year starting June 2027 was 5,250 megawatts higher than its projection for the prior year. Nearly all of this increase is attributable to data centers, PJM said.

“This auction leaves no doubt that data centers’ demand for electricity continues to far outstrip new supply, and the solution will require concerted action involving PJM, its stakeholders, state and federal partners, and the data center industry itself,” said Stu Bresler, PJM’s executive vice president for market services and strategy, in a statement.

An independent PJM market watchdog, Monitoring Analytics, said rising power demand due to data centers was the “primary reason” capacity prices spiked during last year’s auction, too.

A worsening risk of blackouts in the mid-Atlantic region

PJM’s shortfall in guaranteed electricity generation for the year starting June 2027 is roughly equivalent to the electricity used by a city the size of Philadelphia, Silverman said.

“It’s a significant miss,” he said.

Silverman said PJM aims to secure enough power so that this sort of partial grid failure happens no more than once every ten years. With PJM unable to reach this reliability threshold during the most recent capacity auction, the region will be at an “elevated risk” for blackouts starting June 2027, he said.

“It’s an immediate reliability concern, but it’s not in a reliability crisis,” Silverman said.

The projected demand from data centers, however, may not pan out, said Seth Blumsack, a professor of energy policy and economics at Penn State University.

“They could run into delays, they could get canceled — all sorts of stuff could happen,” Blumsack said.

PJM could also request that energy users voluntarily curtail their use or mandate usage reductions, said Hannah Wiseman, a professor of energy law at Penn State University.

“A failure to meet the reserve margin doesn’t mean there will definitely be a blackout,” Wiseman said.

Record-high prices, but PECO says customers will see little impact

Utilities pass capacity costs along to ratepayers, but these costs make up just a portion of utility bills. Households and other energy users across the PJM territory will pay over $16 billion total in capacity costs to power producers for the year following June 2027, an increase of 1.3% in the per-unit price over the last auction. Around 67 million people live in PJM’s territory.

PJM spokesperson Daniel Lockwood said the change to household bills in June 2027 as a result of this week’s auction will be “negligible.”

PECO customers will actually see a decrease of around 30 cents on a typical residential bill as a result of this auction. This is because PECO’s share of the electricity demand on the regional grid fell during this auction, said spokesperson Candice Womer.

But cost increases from prior auctions are continuing to phase in, with bumps for PECO customers scheduled every six months through December 2027.

Capacity costs first ballooned during the auction held in 2024. That auction translated into a 10% increase in PECO customer bills phased in over two years starting June 2025.

A capacity auction held in July 2025 again resulted in record prices and will lead to a roughly 2% bill increase for PECO customers, phased in over two years starting July 2026.

More electricity price hikes could be coming

PJM’s cap on capacity prices will not apply to the next auction scheduled for June 2026.

The grid operator estimates that without the $333 per megawatt-day price cap on this month’s auction, costs would have been roughly 60% higher— or around $530 per megawatt-day.

Silverman worries without an extension of the price cap, capacity costs could rise even higher.

“There’s no relief in sight from higher bills,” Silverman said. “It’s only a matter of how bad it’s going to get.”

Shapiro’s office estimated that the price cap on this month’s auction will save consumers around $126 per household in the year following June 2027.

“My Administration has once again stopped billions of dollars in unnecessary and unjustified energy price hikes from being passed on to families and businesses,” the governor said in a statement. “PJM needs real reform and they are running out of time to protect consumers from their inaction. My Administration will continue to build more energy generation right here in the Commonwealth and push PJM to fix its broken process so we can lower costs, strengthen reliability, and keep more money in the pockets of Pennsylvanians.”

Shapiro’s administration wants to see PJM extend the price cap for an additional year. His office also called for PJM to improve its demand forecasting “so consumers are not forced to pay for unnecessary resources,” and to speed up its interconnection of new power sources to the grid.

In response to this week’s auction results, an industry group representing Pennsylvania utilities released a statement calling for “limited, carefully regulated authority” for utilities to generate electricity, which is currently banned in the state.

“Customers are paying more, but the market is still failing to deliver enough new supply to keep pace with growing demand,” said Andy Tubbs, president and CEO of the Energy Association of Pennsylvania, in a statement. “We cannot allow the lack of new generation to threaten reliability, drive up monthly costs for families and businesses, and squander economic opportunities.”

PECO echoed this idea in its response to this week’s capacity auction, saying the company is working with regulators and policymakers on “needed reforms that will ensure we deliver affordable, reliable power for the long term.”

The Data Center Coalition, an industry group representing data centers, said conditions in PJM’s market are tightening due to multiple factors, including aging infrastructure, power plant retirements and “poor market signals.”

“Growing electricity demand should not be a surprise at this point,” said Aaron Tinjum, vice president of energy for the Data Center Coalition, in a statement. “This is a supply and demand challenge that requires comprehensive and systemic solutions, and these auction results are the most recent indication that energy supply in PJM’s footprint lags what is needed to support this nation’s economic growth.”

Tinjum added that the data center industry is committed to “paying its full cost of service for the energy it uses.”