Rising costs for electricity and the potential for more increases down the road have many consumers rethinking their energy choices – and how competitive marketplaces can help them save now by selecting a plan that’s right for their home or business.
Hundreds of thousands of non-shopping (default service) customers will be hit with sharp increases when utilities adjust their electric generation prices on June 1. This “price to compare” (PTC) reflects the utility’s cost of providing default service to customers who do not make an alternative selection. It changes throughout the year as the cost of energy and other components like capacity change.
But not all consumers will be exposed to higher prices on June 1.
Pennsylvania is among the 14 energy choice states and jurisdictions that empower consumers to select their retail power supplier, giving them more options to shop among a wider range of products and services that bring higher value propositions – and enable them to lock in the best long-term deals to avoid market volatility.
Here are some important things to know about current electric rates, what’s driving them, and how you can do more to protect yourself and save.
What is capacity?
Pennsylvania is part of the PJM Interconnection, the largest grid operator in the country, serving all or parts of 13 states and the District of Columbia. PJM regularly holds auctions to ensure it has the capacity to meet peak demand, even if that capacity is not used all the time.
Think of it as the grid’s ability to meet the highest expected demand, often during extreme weather or peak usage times, like a hot summer afternoon. Or, think of capacity like a parking lot. It ensures there’s enough space available during the busiest times, like the run-up to Christmas, while a lot of those spaces go unused the rest of the year.
The capacity market pricing is a mechanism where power generators bid to be paid for and commit to being available during future periods. Payments are made to those power generators or other resources, like demand response or battery storage, simply for being available and ready to supply power, whether or not they are ever called upon.
So, for example, a natural gas plant might bid in a capacity auction and win a contract to be available during peak times in 2027. Even if it doesn’t end up running much, it gets paid for being ready – which helps cover its fixed costs.
The goal is to ensure there is enough power when demand spikes, encourage investment in new or existing generation capacity, and help grid operators maintain long-term reliability.
Why are rates rising?
When PJM held its 2025-26 capacity auction in July 2024, costs soared by $14.7 billion, an increase of more than 800 percent from the prior year. For the majority of the PJM region, capacity prices for the 2025-26 delivery year went to $269.92 per megawatt-day, up from $28.92 per megawatt-day in the last auction.
While this is a large jump year-over-year, these higher prices are needed to send a signal that more generation is needed on the grid to meet growing demand. PJM predicts its peak demand will grow by 70,000 megawatts to 220,000 megawatts by 2040.
Why is demand going up? Data centers that support the computing power of artificial intelligence and other technologies, along with a broader push to electrify everything from transportation to manufacturing, are driving significant load growth on the regional grid, requiring more power supply.
At the same time, older power plants are being retired faster than they can be replaced by new sources of baseload generation and renewable energy.
To address the issue, PJM initiated its Reliability Resource Initiative to fast-track the process for new generation. PJM selected 51 shovel-ready electricity projects to receive expedited interconnection approval, with 90 percent of the projects expected to be online by 2030. These projects would add 11,793 megawatts to the grid.
These shovel-ready resources – new and uprated nuclear and natural gas-fired power plants, as well as new battery storage – can come online quickly and most effectively contribute to reliability. This gives a big boost to the grid’s power supply.
How can I protect myself against rising prices?
Increased electrification and the proliferation of data centers continue to drive demand. However, not everyone will see their prices rise as a result. Customers who have shopped and chosen a fixed price product from a retail supplier will not be exposed to volatility in the market during the length of their contract. For customers who locked in fixed prices, they will be paying that same price after June 1.
If you haven’t shopped for a retail electricity supplier, then you could be hit by this volatility, right at the time when energy usage increases during the summer heat. If you’re not shopping for the best deals among your state’s retail energy suppliers, then you’re probably paying more to power your home or business.
One study based on U.S. Energy Information Administration data found that since 2008, the average power price for all customers (residential, commercial and industrial) in competitive states increased by 11.5%, compared to a significantly higher increase of 43.6% for all customers living in monopoly utility states.
In real dollars, the study found consumers in 14 competitive states and jurisdictions saved an estimated $480 billion from 2008 through 2023 compared to the monopoly states’ pricing trends.
Clearly, competition works.
In states with retail competition, consumers have been able to choose their electric service provider for decades, in some cases, but it makes even more sense today. Locking in long-term rates now could generate big savings down the road, especially when compared against long-term trends in utility costs.
Given current markets, now is the perfect time to review your electric bills, understand your rates, and explore all the available options your state offers to switch and save.
Guest Authored by Vistra
