The surge in electricity demand from artificial intelligence (AI) data centers, coupled with the delayed retirement of old power plants and the sluggish construction of new plants, has led to the highest-ever electricity supply auction prices for the largest regional grid operator in the United States, PJM Interconnection, potentially exacerbating the burden on electricity consumers.
On Tuesday, PJM announced that the electricity supply auction price for the delivery period from June 2026 to May 2027 reached $329.17 per megawatt-day (MW-day), a 22% year-on-year increase, with a total procurement amount of $16.1 billion. It is estimated that electricity bills for consumers could rise by 1% to 5%.
Timothy Fox, Managing Director of energy policy consultancy firm ClearView Energy Partners, told the Financial Times that auction prices will eventually be reflected in consumers’ bills, which is “not good news for consumers.”
To prevent drastic fluctuations in auction prices, PJM had previously established a price range (between $175 and $325 per megawatt-day) in agreement with the Federal Energy Regulatory Commission (FERC) in 2024 under pressure from Pennsylvania Governor Josh Shapiro. The current auction price is nearing the upper limit of this range.
The soaring electricity demand driven by AI is particularly evident in the “Data Center Alley” in Virginia. However, with the decommissioning of old power plants and delays in connecting new plants to the grid, the grid is under pressure. Despite aggressive investments in energy infrastructure by tech giants like Amazon, Microsoft, and Meta, the imbalance between supply and demand remains difficult to resolve in the short term.
PJM has issued a warning that by 2030, up to 30% of the generating capacity within its system may face the risk of retirement.
According to data from the U.S. Department of Labor, national electricity prices have seen a 5.6% year-on-year increase as of June, far exceeding the overall inflation rate of 2.7%, indicating that the pressure in the energy market remains high.
Bloomberg reported that PJM is now unable to provide additional power capacity for new data centers, and developers may need to build their own power plants to meet the increasing electricity demand. Joe Bowring, President of the independent oversight agency Monitoring Analytics, recently stated in an interview that last year’s electricity auction prices soared to $14.7 billion, setting a new record high and signaling further price increases.
Bowring suggested that if data center operators build their own power plants, PJM should establish a fast-track review process to quickly integrate new power sources into the grid and reduce lengthy approval periods. He also pointed out that merely signing green energy contracts with existing power plants cannot address the grid integration issue; only added supply can fundamentally address the problem.
PJM Interconnection is the largest regional transmission organization (RTO) in the United States, responsible for operating wholesale electricity markets and grid stability covering 13 eastern states and the District of Columbia, serving approximately 65 million people. Its capacity market is seen as a barometer of national supply reliability, and auction results are considered a key indicator of future electricity price trends.