On September 29, 2026, federal regulators rejected part of PJM’s emergency plan to buy new power supply for data centers. The next morning, PJM postponed the auction that was supposed to open that day. As of mid-October it has not set a new auction date, and it plans to file a revised proposal with regulators by the end of the month. PJM is the grid operator for New Jersey and twelve other states, and this was its answer to a problem it has now failed to solve in three straight capacity auctions: electricity demand is growing faster than supply. For commercial building owners, the stall does not stop bills from increasing. It removes the last reason to assume someone else is going to fix it.
The short version
- PJM’s capacity auction for the 2028/29 delivery year cleared at the $325 per megawatt-day price cap, the third auction in a row to hit the ceiling, and still came up 6,831 megawatts short of the grid’s reliability requirement.
- Data centers are the reason. PJM’s independent market monitor attributes about $6.3 billion of the latest auction’s record $16.4 billion cost to data center load, and puts the cumulative capacity-cost increase across the last four auctions at $29.4 billion.
- The proposed fix was a one-time Reliability Backstop Procurement: contracts of up to 15 years for roughly 6.8 gigawatts of new power plants, with an offer cap of $555 per megawatt-day, 71% above the regular cap. Outside estimates put the cost near $20 billion. Regulators kept the cap but rejected pieces of the plan, and PJM pulled the auction.
- Elevated capacity costs are already locked into commercial bills through May 2029. The backstop, whenever it runs, adds to that.
- The capacity portion of a building’s bill is set by its own usage during a handful of summer peak hours. That makes it the one line a building owner can engineer down, and on-site solar and storage are the tools that do it.
How a data center ends up on your bill
Commercial electric bills in PJM territory carry a capacity charge. It is not energy. It is a reservation fee: PJM pays power plants years in advance to promise they will be available during the grid’s tightest hours, and the cost of those promises is passed through to every customer in the territory.
The fee is set at an annual auction. When demand grows and supply does not, the clearing price rises for everyone. Data centers are the largest new source of demand the grid has seen in a generation. PJM expects data center and other large-load demand to grow by as much as 70 gigawatts by 2038. Data centers do not buy their own power plants; they plug into the same market as everyone else, and the reservation fee goes up for all of it.
That is the mechanism. A warehouse in Edison or an office building in Parsippany pays more for capacity because a hyperscaler broke ground in Northern Virginia. For the full picture of what sits behind a commercial rate, see how electricity rates are determined.
The numbers
| Delivery year | Clearing price ($/MW-day) | What it tells you |
|---|---|---|
| 2024/25 | $28.92 | The old normal |
| 2025/26 | $269.92 | Nine times higher in one year |
| 2026/27 | $329.17 | First auction under the regulator-approved price collar, at the cap |
| 2027/28 | $333.44 | At the cap again; first time the whole region fell short of its reliability requirement |
| 2028/29 | $325.00 | At the cap a third time; 6,831 MW short; PJM’s own simulation shows the uncapped price would have been $554.72 |
The 2028/29 result cost $16.4 billion, a record. The cap is the only reason it was not higher. PJM’s simulation without the collar put the price at $554.72 per megawatt-day, which is why the backstop’s $555 cap is not a coincidence. That is the number the market actually wants.
The backstop that stalled
The backstop plan had political momentum. On January 16, 2026, the White House’s energy council and the governors of all thirteen PJM states signed a statement asking PJM to run an emergency procurement, with 15-year price certainty and the costs assigned to the utilities whose data centers created the shortfall.
PJM’s board directed the plan in late July: a one-time auction to buy roughly 6.8 gigawatts of new capacity, bids open September 30 through October 21, results in early December, contracts of up to 15 years.
Then FERC (the Federal Energy Regulatory Commission, which must approve changes to PJM’s market rules) issued its order on September 29. It accepted the $555 offer cap. It rejected a provision letting cooperatives and municipal utilities opt out of the costs, calling it discriminatory, and it set the remaining questions, including who pays, for further proceedings. PJM announced the delay the next day and has said it will file a revised plan. FERC’s own chairman described the situation as a mess.
The emergency plan is on hold. The emergency is not.
What this means for a New Jersey building
Three things, in order of certainty.
The next three years are already priced. The 2026/27 step-up, a 22% jump in the capacity clearing price, took effect on June 1, 2026. The 2027/28 and 2028/29 prices are known. Whatever happens with the backstop, a commercial account in New Jersey, whether in PSE&G, JCP&L, Atlantic City Electric or Rockland territory, is carrying elevated capacity costs through May 2029. For budgeting, that is useful. For owners who do nothing, it is simply the bill.
The backstop adds cost on top. When it runs, its cost will be passed through to utilities and suppliers, and from them to customers. The co-op opt-out that FERC struck would have narrowed who pays; its removal widens it.
The uncertainty is itself a cost. Suppliers price risk. A grid operator with a known shortfall, a stalled fix and no auction date is risk, and it shows up in the fixed-price supply contracts commercial buildings sign.
Here is the part most owners never hear from their supplier: the capacity charge is not a flat tax. In PJM, each account carries a capacity obligation. It is called the Peak Load Contribution (PLC), or the capacity tag, and it is set by the building’s average demand during the five highest system-wide peak hours of the prior summer. A building that draws hard on those five afternoons pays for that draw for the entire following year at the auction price. A building that is quiet during those hours resets its obligation downward.
The one line you control
Energy prices are set by markets a building owner cannot influence. The capacity tag is set by the building’s own meter during predictable summer peak windows: late, hot, high-load afternoons. Three tools work on it.
Efficiency and load management flatten the baseline. This is the unglamorous first step and it should not be skipped.
On-site solar generates at maximum output during exactly the season that sets the tag. A rooftop or solar parking canopy reduces grid draw across every summer afternoon, cutting both the kilowatt-hours a building buys and the peak demand that prices them.
Battery storage turns the tag into a targeting problem. A battery discharging into the handful of likely coincident peak hours cuts the obligation with precision. It can also be built fast, which is why grid operators are counting on it. And unlike solar, storage still carries a full federal Section 48E tax credit for projects beginning construction through 2033, on top of state programs that pay batteries to perform.
Together they convert a rising, externally imposed cost into a partly self-determined one. The building stops being a passive share of the data center’s demand and starts being a smaller one. That is the practical meaning of reducing operating costs with solar.
A note for New York and New England owners
New York (NYISO) and New England (ISO-NE), which covers Massachusetts and Rhode Island, run separate markets from PJM with the same disease: load growth, retirements and winter fuel-security risk, on top of commercial rates that are already among the highest in the country. The acronyms differ; the owner’s playbook does not. Cut grid draw during the specific hours that drive costs up.
The window that makes the response cheaper
The capacity trajectory above runs through 2029 regardless of federal tax policy. Commercial solar projects without a documented construction start by July 4, 2026 must be placed in service (built, interconnected and authorized to operate) by December 31, 2027 to claim the 30% federal Investment Tax Credit (ITC), and that runway is shorter than it sounds once interconnection, permitting and equipment lead times are laid end to end. Owners who miss it are not stranded. The economics still clear typical hurdle rates in high-rate territories without the credit, but the same system costs meaningfully less on the 2027 side of the line. Owners without tax capacity can reach the same bill reduction through a power purchase agreement with no capital outlay.
Three auctions at the cap and a stalled rescue is the market saying the trend is structural. The rational response is to treat the next capacity bill not as an expense to absorb, but as a quote to beat.
Frequently asked questions
Why are data centers raising commercial electricity bills?
Data centers add large amounts of demand to the grid without adding supply. In PJM, which serves New Jersey, that demand raises the price every customer pays for capacity, the reservation fee for power plants during peak hours. PJM’s market monitor attributes about $6.3 billion of the latest auction’s cost to data center load.
What is the PJM Reliability Backstop Procurement?
A one-time auction PJM proposed to buy roughly 6.8 gigawatts of new capacity under contracts of up to 15 years, with an offer cap of $555 per megawatt-day. FERC accepted the cap but rejected part of the plan on September 29, 2026, and PJM postponed the auction the next day. PJM has said it will file a revised plan.
Will commercial electric bills in New Jersey keep rising through 2029?
The capacity prices for the 2026/27, 2027/28 and 2028/29 delivery years are already set, all at the regulator-approved cap, so elevated capacity costs are locked in through May 2029. The backstop procurement, when it runs, adds to that.
How does solar reduce a building’s capacity charges?
A building’s capacity obligation, called its Peak Load Contribution or capacity tag, is set by its demand during PJM’s five highest summer peak hours. Solar produces at full output in those hours, reducing measured draw, and paired storage can discharge into the specific peak hours to cut the tag further. A lower tag means a lower capacity bill for the entire following year.
Does this affect buildings in New York or Massachusetts?
Those states sit in NYISO and ISO-NE rather than PJM, but they face the same pressures (load growth, retirements and fuel-security risk) and some of the highest commercial rates in the country. On-site generation and storage serve the same hedging function in all three markets.
About Plankton Energy. Plankton Energy develops, engineers, installs, owns and operates commercial solar and storage systems across New Jersey, New York, New England and California. Every proposal models the building’s actual rate structure, including capacity and demand exposure, so owners can see which lines of the bill a system attacks and what the next three delivery years cost with and without one. To find out what your capacity tag is costing you, contact Plankton Energy for a bill-level assessment.
Disclaimer: This article is for general informational purposes and does not constitute tax, legal, or investment advice. Market figures reflect publicly announced PJM auction results and FERC orders as of October 2026 and are subject to regulatory change.