On Tuesday, PJM — the regional transmission organization that coordinates the movement of wholesale electricity in 13 mid-Atlantic states and the District of Columbia — released the results of its recent base residual auction or BRA.
The auction price will help determine prices for one year out — or the period of June 2026-May 2027. That means the big price jump everyone got this June is the result of an auction held in 2024.
The auction results released Tuesday said there will be a capacity price of $329/MW a day for the period of June 2026-May 2027 — or a more than 20% increase.
That sounds like a lot, but it is nothing compared to a year ago, when the results of the auction represented an 800% increase — which is why we are getting huge bills now.
What does that mean?
BINJE, after speaking with the N.J. Board of Public Utilities, PSE&G and others — and getting statements from the governor, the Assembly Speaker and the Senate State President — attempts to break it down in what we hope is a helpful Q&A format.
Here goes:
Q: The auction price is up 22% from a year ago, does that mean we should expect a 22% increase a year from now?
A: Not necessarily, PSEG officials said. Despite this increase in the PJM BRA price, if other supply-related costs remain roughly the same, they anticipate a near flat impact on customers’ electric bills effective June 1, 2026.
This anticipated near flat impact to customer’s electric bills is due to factors that offset the higher capacity price. These factors include:
A high Basic Generation Service (BGS) effective price from three years ago rolling off. Each year, the BGS price is added to customer invoices in thirds to smooth out the ups and downs, so that no single year has an outsized impact: each year, one-third of the new price rolls on and one-third of an old price rolls off.
In addition, last year’s BRA “true up” or adjustment of capacity prices that reconciled multiple years of no auctions was unusually and significantly high. It was this significant true up in 2024 that had an outsized impact on capacity prices and ultimately customers’ electric bills. The BRA reconciliation adjustment is not anticipated to be significant this year.
PJM has said the results of the auction likely will only produce an increase of a few percentage points.
Q: Does that mean our energy problems are solved and that the market has stabilized?
A: Far from it. BPU President Christine Guhl-Sadovy said the PJM system is broken and continues to push for reform that will better satisfy the supply-demand imbalance – though she agreed that there will not be a huge price increase a year from now.
“While it will take some time to analyze (the) results stemming from PJMs BRA, New Jersey families are already living with the consequences of PJM’s broken market,” she said. “While the PJM-auction results reach new highs and reflects PJMs flawed market design, due to some changes that NJBPU advocated for, we don’t anticipate a comparable bill impact as we did this summer at this time.”
Q: The $329 price is at the peak of the mandated cap that Gov. Phil Murphy, Pennsylvania Gov. Josh Shapiro (and others) imposed on PJM. What should we make of that?
A: This year’s auction came in at the top of the mandated price cap, suggesting that the real demand for capacity could potentially be even higher.
Murphy, in a statement co-signed by State Sen. President Nick Scutari and Assembly Speaker Craig Coughlin, expressed that concern.
“The results of this capacity auction show that the price cap New Jersey fought for with other states this year prevented a historic spike in energy prices,” they wrote. “However, the results of this auction show energy capacity prices continue to rise – and the fact that energy prices have already reached the cap is a clear sign of structural issues at PJM.
“As Gov. Murphy and nine other bipartisan governors recently stated in a letter to PJM Board of Managers, we demand that PJM be composed of leaders that take seriously state concerns around affordability and resource adequacy and that the states have a formal say in PJM governance.”
(Murphy, Scutari and Coughlin said the issue goes beyond New Jersey’s boarders.
“Over the past year, it has become increasingly clear that grid reliability issues and the current cost crisis are not just a New Jersey problem,” they wrote. “Across the region, families and businesses are facing the consequences of a system that is opaque and unresponsive to the needs of the people it is supposed to serve. New Jersey is at the forefront of efforts to increase PJM member states’ voice on the Board, and we have been outspoken about the need for leadership changes at PJM as well as increased representation of the states PJM serves.”
Q: How did we get here again: Is this the result of the state’s failed attempt to create an offshore wind energy sector?
A: Not necessarily. It’s the result of having an increased demand in energy needs and not nearly enough supply to handle it. If all the proposed wind farms were working at full capacity now (and that never was the timeline), there still would be a shortage.
The region – and the country – needs more sources of energy.
In this latest auction, PJM attracted 2,669 megawatts of additional power supplies, which will be added through upgrading existing power plants and adding new ones. And while it marks the first time in the last four auctions that new generation was added, the additions only represent about half the amount of new power demand PJM expects to see over the period the auction covers.
Q: So, if we need more supply, can’t we just build more natural gas plants (by far the biggest generator of energy in the state) – or reopen those that were recently closed?
A: Republican gubernatorial candidate Jack Ciattarelli has called for doing just that — as has Greg Lalevee, the influential leader of the International Union of Operating Engineers Local 825. But it takes time to do so. PSEG officials estimated it could take five years or more to build a new plant. Supply issues remain a big challenge.
Q: Just to clarify, does the big rise in prices mean a big rise in profit for energy companies?
A: No. While the situation has made energy companies seemingly more valuable (their stock prices are rising), they do not directly benefit from the increase on the bills. That is a pass-along to customers, not a profit center.
Q: Is there any relief ahead on bills?
A: Actually, yes. Murphy has pledged to give every ratepayer a $100 bill credit to help offset the increases that many began feeling this month. The credits are scheduled to appear on bills in September and October, pending approval by the BPU.
Q: The BPU did not move on the issue during its recent July meeting. Is there any reason to believe it will not do so in August?
A: No, there are logistical challenges to be worked out on the process. But there’s no reason to believe the credit is not coming. BPU officials cannot comment on future agendas, but there is a strong belief that they will take action next month.
Q: Of course, this bill credit is just a stop gap – and will conveniently come right before the election. What needs to happen moving forward? Should we be worried?
A: PSE&G says it’s clear from New Jersey’s experience in PJM that this construct is no longer working as intended – supply is tightening, and not enough power generation is planned.
The market currently has an artificial ceiling and floor. While this auction’s results were limited by the price cap that is in effect, the cap only lasts for one more auction. After that auction, customers could be exposed to much more volatile and costly results.
Q: Again, how did we get here?
A: The PJM BRA fell behind schedule in 2019 and has only been a one-year look ahead since. The PJM BRA aims to catch up and the auction scheduled for December 2026 is for the 2029/2030 delivery year. However, New Jersey needs to act before this time and even then not rely on a 3-year cycle.
Over the past 20 years, the demand for electricity was relatively flat making long-term planning more simple and providing a false sense of security for resource adequacy. But in recent years, the demand for power and transmission has grown. Now, supply cannot keep up with demand, so the need for meaningful change to the market construct is needed.
