PJM 2026/27 Base Residual Auction Results: Pricing, Impacts, and Opportunities
Record-High Clearing Prices and Trends in Capacity Auctions.
PJM’s latest Base Residual Auction (BRA) for the 2026/2027 delivery year cleared at record-high capacity prices across the entire PJM region. All zones cleared at the price cap of $329.17 per MW-day (UCAP), reflecting a tight capacity supply-demand balance. This RTO-wide clearing price is the highest in PJM history, representing a 22% increase (+$59.22) from last year’s clearing price of ~$269.92/MW-day.
The jump continues the sharp upward trend observed in the prior auction – the July 2024 BRA (for 2025/26) saw prices rise nearly tenfold compared to the previous year. In that 2025/26 auction, most of PJM cleared at $269.92/MW-day (about $98,521 per MW-year), up from roughly $28–$30/MW-day the year before.
Two constrained zones (Baltimore Gas & Electric and Dominion) even hit their zonal caps last year, clearing at $466.35 and $444.26/MW-day respectively (equivalent to ~$170k per MW-year). In the latest 2026/27 BRA, those zones saw prices fall back to the $329.17 cap (since the entire RTO capped out), while “Rest of RTO” areas increased from $269.92 to $329.17.
Overall capacity procurement costs have surged.
PJM procured about 134,311 MW of capacity for 2026/27, and the total market cost (price × quantity) is approximately $16.1 billion, up from $14.7 billion in the previous auction. (For perspective, the 2025/26 auction’s cost was already a massive jump from just $2.2 billion in the prior year).
These unprecedented prices indicate a tight reserve margin and strong price signal for new or retained capacity. They also mark a dramatic reversal from the mid-2010s and early-2020s auctions, when excess supply kept PJM capacity prices low.
The upward trend has been driven by factors like higher peak load forecasts, increased reserve requirements, generator retirements, and market rule changes, all of which have tightened the capacity market and lifted clearing prices.
Impact on Firm vs. Flexible Loads (5CP and Peak Contribution)
High capacity prices have different implications for firm loads versus flexible loads, due to PJM’s 5 Coincident Peaks (5CP) methodology for allocating capacity costs.
In PJM, each customer’s capacity obligation (Peak Load Contribution, PLC) is determined by their demand during the system’s five highest peak hours of the year (typically summer afternoons). A firm load (one that cannot reduce usage during those peak hours) will have a high PLC equal to its full contribution to peak, and thus must pay for capacity on every kilowatt of that peak demand.
On the other hand, a flexible load that can curtail or shift load during 5CP hours will register a much lower PLC, dramatically reducing its share of capacity costs.
With the new clearing price of $329.17/MW-day, each 1 MW of peak load now carries about $120,000 per year in capacity charges (329.17×365 ≈ $120,000). A firm consumer that continues normal operations through peak events will incur this full cost per MW of peak demand. For example, a business with a 5 MW peak could see roughly $600k/year in capacity charges at current rates, a substantial increase from prior years.
In contrast, a flexible facility that can temporarily cut that peak demand (e.g., by shedding load or running on-site generation during PJM’s peak hours) can avoid most of that cost.
Reducing demand during the critical 5CP hours directly lowers the next year’s PLC and thus the capacity charge. In other words, every megawatt shaved from those peak hours is a megawatt for which the customer no longer needs to pay $329.17/MW-day in the coming delivery year.
This makes peak-shaving extremely valuable: recent estimates show avoiding 5CP peaks can save on the order of $100k+ per MW-year for customers in high-priced zones. Firm loads lacking this flexibility have no such relief and will bear the full brunt of the capacity price spike.
This dichotomy effectively rewards load flexibility, an intentional aspect of PJM’s market design that allocates costs to those contributing to system peaks.
Implications for Power Bills and Capacity Cost Components
The surge in capacity clearing prices will translate into higher electricity bills throughout PJM, particularly via the demand (capacity) charge portion of bills.
Many large consumers pay capacity charges based on their PLC (in $/kW-month terms), which will now be much higher. At $329.17/MW-day (about $10/kW-month), capacity charges are an order of magnitude greater than they were just two years ago.
Consequently, overall power bills for customers are expected to rise significantly. Analyses of the previous auction’s impact estimated that bills could increase by as much as 20–30% due to the capacity cost jump. The exact impact will vary by utility and customer class – some retail providers had hedged or locked in capacity costs, while others will pass through the full increase.
For industrial and commercial users on pass-through tariffs, the capacity charge line item will spike. Even residential and small business customers on bundled rates may see higher rates as utilities recover these higher capacity payments through regulated charges.
To put the costs in perspective, PJM’s reliability assurance costs went from roughly $2.2 billion to $14.7 billion with the last auction, and have now ticked up to $16+ billion. These costs are ultimately collected from electricity customers in the region. Capacity charges, once a relatively minor component of PJM power bills during years of surplus, have now become one of the dominant drivers of bill increases.
Customers unable to adjust their peak usage (firm loads) will see the full impact – for example, a company that previously paid ~$1/kW-month for capacity might now pay around $10/kW-month for the same demand level, a substantial hit to the bottom line. Such increases underscore the importance of active load management as part of electricity cost control in PJM.
Opportunities for Flexible Loads under High Capacity Prices
The flip side of high capacity prices is a strong incentive for flexible loads to respond and benefit. PJM’s market design provides strategic opportunities for customers who can be flexible in their demand:
Peak Load Management (5CP Reduction): By anticipating and reducing load during the 5CP peak hours, a customer can sharply lower its PLC and thus its future capacity charges. With capacity at ~$120k per MW-year, even a few hundred kilowatts of load reduction during peaks can yield tens of thousands of dollars in annual cost savings. Many large energy users are now investing in controls, on-site generators, or storage to shed load during peak alerts. Effectively, peak shaving allows flexible consumers to avoid paying the high clearing price on a portion of their load.
Demand Response Programs: PJM’s Reliability Pricing Model allows demand-side resources to participate in the capacity market. Enrolling as a demand response (DR) resource means the customer agrees to curtail load during grid stress events in the delivery year, and in return earns capacity payments at the clearing price. In today’s market, those payments are very lucrative – on the order of “tens of thousands of dollars annually” per MW of committed reduction. In fact, with the new $329/MW-day clearing price, a 1 MW demand response commitment would earn roughly $120k over the year (minus any performance penalties if one fails to curtail when called). This provides a direct revenue stream that can offset a customer’s power costs. As one analyst noted, customers are leaving significant money on the table by not participating in demand response under these price conditions.
Load Shifting and Efficiency: More broadly, energy management strategies that reduce peak demand have become far more valuable. Measures such as rescheduling energy-intensive processes to off-peak times, investing in energy efficiency to lower overall demand, or deploying battery storage to flatten peak usage can all help to either reduce capacity charges or enable profitable demand response participation. For example, using a battery to discharge during the top five peak hours can directly cut a facility’s PLC, yielding savings at the new high rates. Similarly, efficiency upgrades that permanently lower demand will now provide greater payback by avoiding capacity costs.
In summary, the latest PJM capacity auction results signal very high capacity cost exposure for inflexible consumers, but equally large opportunities for those who can be flexible.
Firm loads that cannot adjust will face substantially higher capacity-related charges on their electric bills, as the clearing price surge feeds through to PLC-based costs. Meanwhile, flexible loads can leverage the PJM market design to their advantage – by shaving peak demand or participating in demand response, they can dramatically reduce their capacity charges or even earn capacity revenues at these elevated prices.
The current price environment thus strongly rewards peak-conscious behavior. Going forward, we can expect more consumers to adopt peak load management practices and demand-side resources to play a greater role, both to mitigate their own costs and to help supply the capacity needed in PJM’s constrained system. This aligns with the intent of the capacity market: providing price signals that encourage both supply and demand-side solutions to maintain reliability.