PennFuture Joins Challenge to PJM to Protect Pennsylvanians' Energy Rates

Energy prices are high, but this summer, they are expected to surge even higher, to the tune of billions of dollars that will be borne by everyday Pennsylvanians and their families. The causes: Our region’s grid operator is failing to effectively run their “capacity market”, and complacent elected officials would allow the fossil-fuel industry to exploit the failure to reap massive, unjust profits by pretending to add “reliability.” Policymakers, and ordinary residents all must be wary of the false solutions sold by slick salesmen.

PJM, an unelected quasi-governmental agency, must ensure that electric capacity is available when we need it. To keep the grid running, PJM has set up a “capacity market.” The capacity market allows generators to submit bids to be available when called on. In return, these companies receive guaranteed “capacity payments” that are over and above what they may get for selling electricity. 

But this market is failing, and the rules urgently need revision. 

Under PJM’s current capacity market structure, these capacity payment prices are set to increase nearly ten times their current rate. This exponential rise means that across our entire grid, costs will soar into the billions, translating directly into higher electricity bills for consumers.

In PJM’s market, when prices increase it is supposed to create a market signal for electric generators to build new sources of electricity and keep prices steady. Instead, as Governor Josh Shapiro pointed out in a recent complaint to federal regulators, thousands of new energy projects languish in a backlog awaiting PJM approval to join our power grid. New generation is years behind schedule, so while we see power companies raking in these guaranteed payments, Pennsylvanians are left in the cold and dark, facing skyrocketing prices without getting improvements in reliability when we need it most. 

This is why PennFuture is joining the challenge to PJM that Governor Josh Shapiro filed with federal energy regulators.

However, the answer is not simply “add more fossil fuel power plants.” Fossil fuel interests are taking advantage of these prices and the backlog of new generation—especially clean and renewable energy sources—to reap windfall profits. They also want to distract our attention from the real, available-today solutions of clean energy, and instead make us believe that they would increase grid reliability by building even more gas-fired power plants. This is a false solution with dangerous real-world consequences, and policymakers, advocates, and the public at large need to know it.

It is the everyday Pennsylvanian who suffers when we buy into these false solutions:

• Fully-built power plants don’t spring up overnight. Electricity bills are going up now. New gas plants, even if all the interconnection queue problems were resolved today, would still not be operational for years.
• Gas plants disproportionately fail when we need them most. Recent events show that gas plants are the source of—not the solution to—unreliable power. In 2022 during Winter Storm Elliot, gas-fired power plants accounted for less than half of the capacity on the grid during the storm, but more than 70% of the power failures.
• We need to fix existing plants, not build new gas plants. Increasing the reliability at the existing gas plants on our grid would have the same effect as adding over 12 GW of generation—enough to power 12 million homes—while saving money and avoiding delays. If grid reliability is truly what we’re after, these gas power plants should focus on fixing their existing reliability problems through weatherization and other means, not building new plants with the same issues. 

In the meantime, PJM needs to fix its market so that consumers aren’t forced to pay high prices for no solution. PJM’s previous market revisions have proven ineffective, and larger changes must be made. 

When we are concerned about the volatility and unpredictability of financial markets, we diversify our investments, and the same should be true about energy markets. Solar is often the least expensive new generation available today. Moreover, new renewable energy projects are waiting to come online right now. When combined with wind, storage, and clean base energy, gas can be used to fill in gaps—but unreliable gas plants should not be counted on for our main source of generation.  The capacity market and its problems must be addressed so that it can actually provide reliability rather than simply function to increase profits for fracked gas companies.

To this end, PennFuture supports Governor Shapiro’s call for immediate action and for PJM to delay the next capacity auction, allowing time for market redesign without putting consumers on the hook. We are encouraged that the governors of New Jersey, Maryland, Delaware, and Illinois have also called for reform at PJM. While Governor Shapiro has negotiated a possible settlement with PJM that would prevent prices this summer from rising as much as they otherwise would, it’s still possible to see prices next year increase almost 40% again. This settlement will not fix the fundamental flaws in the market.

That’s why we believe more effort is needed immediately to break the backlog, prioritize renewable energy development in PA, and lower energy prices for everyone. We will continue to advance these issues with PJM and federal and state agencies. We will continue to fight against forces that give fracked gas a windfall, especially at the expense of Pennsylvania families. PennFuture will fight for the meaningful and smart redesign of the PJM market and prioritization of the financial and physical well-being of Pennsylvanians.  

Patrick McDonnell
President & CEO, PennFuture

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