The PJM capacity auction sent a message the Washington left can’t spin away

The latest PJM capacity auction cleared at the maximum allowed price—$333 per megawatt-day—and still came up short. Even at the price cap, the market could not buy enough power to meet PJM’s own reliability standard.

Capacity auctions exist for one reason: to make sure the lights stay on when the system is under real stress. Not on a mild spring afternoon. On the worst day of the year—when demand peaks, equipment is strained, and weather is working against you. This auction tested that standard and found the system wanting.

This did not happen overnight. Electric demand has been climbing for years. Data centers multiplied. Electrification mandates piled new load onto the grid. Population shifts changed where and when power is used. Utilities, regulators, and planners saw it coming. The forecasts were published. The warnings were filed. No one was caught by surprise.

Supply, meanwhile, lagged badly.

New dispatchable power plants take years to permit, finance, and build. Those timelines grew longer, not shorter. Projects bogged down in regulatory reviews. Lawsuits became routine. Interconnection queues stretched out for years. At the same time, existing power plants—coal, gas, nuclear—were pushed into early retirement. The math stopped working.

Capacity markets do not reward good intentions. They pay for performance when things go wrong. Power that runs when the grid is under stress earns full value. Power that depends on weather does not, because weather does not take orders. Batteries help, but only for so long. New plants cannot appear on command.

For decades, coal, natural gas, and nuclear plants carried the system. They ran day and night. They showed up during heat waves and cold snaps. They kept reserve margins healthy and prices stable. Policy choices accelerated their exit before replacements were ready.

The auction simply counted what was left.

By the time bidding hit the price cap, PJM still had not secured enough dependable capacity. That is not a market failure. That is a supply failure. You cannot buy power plants that no longer exist, no matter how high the bid.

The cap did what it was designed to do—it limited how much customers would be charged. It did not create megawatts out of thin air. Raising the cap would have raised prices without fixing the shortage. The damage was done years earlier.

Now the bill comes due.

Capacity costs from this auction will be baked into electric rates for years. Households will see higher monthly bills regardless of fuel prices or weather. Businesses will face higher fixed costs that squeeze margins and weaken competitiveness. Manufacturers will factor those costs into decisions about where to invest—or whether to invest at all. This is the real-world cost of pretending supply does not matter.

Political rhetoric about protecting working families collapses when electricity becomes scarcer and more expensive. Power prices respond to physics and infrastructure, not slogans. Shrinking reserve margins and fewer dependable plants mean higher costs. Ratepayers pay them every time.

For years, planners assumed new capacity would show up somehow, even as rules made building it harder. Retirements accelerated. Replacements stalled. Hope replaced hard planning. This auction priced that gamble.

PJM followed its rules. The market worked as designed. It revealed the condition of the system policymakers handed to it. Demand is still growing. Data centers are still being built. Electrification policies are still adding load. Peak demand forecasts are still rising.

Supply constraints remain. Permits still take years. Interconnection queues are still backed up. Financing remains uncertain. More retirements are already scheduled. There is no near-term surge of dependable capacity waiting in the wings. Under those conditions, higher capacity prices are not a surprise. They are inevitable.

Reliability is built, not declared. Power plants and transmission lines take time. Skilled workers and fuel supply chains matter. Decisions made today show up in auctions years later. Reserve margins are the system’s shock absorber—and they are thinning.

This auction measured the result.

Unless policy changes to allow dependable power to be built and kept online, the pattern will continue. Capacity will tighten. Prices will rise. Customers will pay.

The auction sent a message in megawatts and dollars. The Washington left may try to spin it, but the grid will not.

Terry L. Headley, MBA, is founder of The Hedley Company – Communications & Research for Energy. A former journalist, he has more than 25 years of experience analyzing electric power markets, fuel supply, and energy policy, with a focus on grid reliability and the real-world cost impacts of energy decisions on households, businesses, and regional economies.