PJM Board Extends $325/MW-Day Capacity Price Cap Through 2030
PJM Interconnection's board voted in February 2026 to extend the $325/MW-day capacity price cap through 2030, a move projected to save the grid operator's 67 million customers an estimated $27 billion on energy bills. The cap comes after the 2026-2027 capacity auction cleared at a record $329.17/MW-day — a 22% increase over 2025. Meanwhile, January 2026 wholesale prices averaged $156.87/MWh, up 35% year-over-year, driven by surging natural gas costs and record demand from data center growth across PJM territory. For commercial electricity buyers in Pennsylvania, Ohio, Illinois, New Jersey, and the broader Mid-Atlantic,capacity charges will still rise, but the cap prevents the worst-case scenarios that an uncapped market could produce.
What Is the PJM Capacity Market and Why Does the Cap Matter?
PJM's capacity market ensures that enough power generation exists to meet future demand. Generators bid into annual auctions, and the clearing price — expressed in dollars per megawatt-day — is passed through to retail customers as a line item on their electricity bills. When that price spikes, every commercial and industrial customer across PJM's 13-state footprint feels it.
The 2026-2027 auction cleared at $329.17/MW-day — the highest in PJM history. Without the cap, this price would flow directly into retail rates starting June 2026. The "price collar" at $325/MW-day shaves the top off, but the trajectory is unmistakable: capacity is getting more expensive because supply is tightening while demand accelerates.
January 2026: Wholesale Prices Hit Alarming Levels
| Period | Load-Wtd Avg LMP | YoY Change |
|---|---|---|
| January 2024 | $43.00/MWh | — |
| January 2025 | $116.00/MWh | +170% |
| January 2026 | $156.87/MWh | +35% |
Source: PJM Markets Report, February 19, 2026. Load-weighted average LMP.
The numbers are stark: PJM wholesale prices have nearly quadrupled in two years on a January-to-January basis. This isn't a seasonal blip — it reflects structural forces: higher natural gas prices (driven by expanded LNG exports and geopolitical risk), rapid demand growth from data centers and electrification, and a shrinking reserve margin as aging coal and gas plants retire faster than new generation comes online.
PJM's own 2026 Long-Term Load Forecast projects accelerating electricity demand growth across its territory, with data centers alone contributing a significant portion of new load in Virginia, Ohio, and Illinois. The $11.8 billion transmission expansion plan approved by PJM's board is partly a response to this demand trajectory.
How the Cap Works — And Its Limits
The $325/MW-day "price collar" was first introduced as part of a January 2025 settlement that capped bids for the 2025 and 2026 auctions. Pennsylvania Governor Shapiro, whose state contains the largest share of PJM load, pushed for the extension through 2030.
However, commercial buyers should understand the cap's limitations. It caps the capacity component of wholesale prices — it does not cap energy or transmission costs. With energy LMPs already at $156.87/MWh and transmission costs rising (the $11.8B expansion will be ratepayer-funded), the cap provides partial relief, not a full solution. Total delivered electricity costs in PJM territory will still increase in 2026-2027.
⚡ Expert Insight — KilowattLogic Analysis Team
"The cap extension is a relief valve, not a cure. It prevents the worst-case capacity pricing from hitting bills in June 2026, but energy and transmission costs are doing the heavy lifting now. January LMPs at $157/MWh tell you the whole story — gas prices, data center demand, and retiring generation are all pulling in the same direction. Commercial buyers in PJM should be locking in 24-36 month fixed-price contracts right now. The trend line is clear: energy costs across PJM's territory are structurally higher than anything we've seen in the past decade, and the cap only addresses one of the three cost components."
Commercial Buyer Action Items
The 2026-2027 capacity delivery year starts June 1. New capacity charges hit bills immediately. Fixed-price contracts signed now can lock in current capacity rates before the $329/MW-day clears.
The cap prevents extreme scenarios, but capacity costs at $325/MW-day are still historically high. Combined with rising energy and transmission components, total costs will increase.
PJM's capacity market values demand response. Facilities that can curtail load during peak events earn capacity credits that offset rising costs. This is especially valuable for manufacturing and cold storage facilities.
PJM noted that 2026 congestion values are starting higher than 2025. Zone-specific LMPs can diverge significantly from system average — check if your location is in a congestion-heavy zone.
Sources: PJM Markets Report (February 19, 2026), PJM Board Meeting (February 2026), Pennsylvania Governor's Office, FERC capacity market filings, PJM 2026 Long-Term Load Forecast. All price data from PJM official market reports.