PJM Transmission Congestion and Commercial Electricity Rates
PJM Interconnection commercial rates are surging in 2026 due to severe transmission bottlenecks. As hyperscale data centers consume gigawatts in Virginia and Ohio, the high-voltage grid lacks physical capacity to deliver cheap power. This forces localized dispatch of expensive peaker plants, inflating Locational Marginal Prices (LMP) and socializing multi-billion dollar grid upgrade costs across all ratepayer tariffs.
Executive Impact
- →The Physics of LMP: PJM uses Locational Marginal Pricing to price electricity. Energy is cheap where it is generated (e.g., wind in the west, or Marcellus gas plants) but expensive where it is consumed if the "wires" connecting them are full. In 2026, the wires into Loudoun County, VA and Columbus, OH are full. This congestion dictates that local, expensive power plants must be turned on out-of-merit, inflating the base energy cost for every facility in those zones.
- →The Data Center Drain: PJM is the global epicenter for AI data center expansion. These continuous, 24/7 loads fundamentally alter grid math. They consume the transmission capacity previously relied upon to balance the grid during summer peaks. To fix this, PJM has authorized multi-billion dollar transmission expansions (often 500kV lines).
- →Socialized Cost Allocation: When a new $800M transmission line is built across Pennsylvania and Maryland to feed server farms in Virginia, the cost is not borne solely by the tech companies. Through complex FERC-approved cost allocation formulas, these capital upgrades flow into the Network Integration Transmission Service (NITS) line item, inflating delivery tariffs for standard manufacturing and commercial users hundreds of miles away.
Navigating the Transmission Tariff Trap
Because transmission upgrades are regulated pass-through costs (NITS and RTEP charges), standard competitive supply contracts offer no protection. Retail suppliers legally pass these utility tariff increases directly onto the end user.
- Contract Vulnerability: Many commercial procurement managers sign "Fixed All-Inclusive" contracts, believing they are protected from utility inflation. However, the fine print nearly always contains "Change in Law" or "Regulatory Event" clauses, allowing the supplier to dump surprise PJM transmission rate hikes directly onto the invoice mid-contract.
- Load Shifting as Defense: Just as capacity costs are driven by peak load contribution (PLC), a facility's transmission obligation (NITS tag) is determined by its coincident peak demand at the hour of the local grid zone's highest usage (typically in summer, though winter peaks are occurring). Automated demand response during this single hour can strip tens of thousands of dollars off the following year's transmission bill.
- Basis Risk in Procurement: When buying wholesale power, buyers must carefully manage "basis risk"—the price difference between the highly liquid PJM Western Hub pricing point and their specific physical meter zone. In 2026, locking in power at the Hub without hedging the congestion path to an Eastern constraint zone can result in massive, unbudgeted locational charges.
The Generator Interconnection Queue
The long-term solution to congestion is building new power plants directly within the constrained zones. However, PJM is suffering through a multi-year backlog in its interconnection queue. Because new solar, wind, and battery projects must wait years for the grid operator to study upgrading the very transmission lines that are already congested, relief from the 2026 supply squeeze is structurally delayed until the late 2020s.