Electricity prices to rise this summer

Electricity prices will increase for most residents and small- and medium-sized businesses served by the state’s four regulated electric distribution companies, the New Jersey Board of Public Utilities (BPU) said Feb. 12.

The average electric ratepayer will see an increase of more than $20 a month starting June 1, according to Brian Lipman, director of New Jersey Division of the Rate Counsel.

Results of the state’s 24th annual electricity auction for basic generation service (BGS) will result in higher costs for electricity supplied by Jersey Central Power & Light, Public Service Electric & Gas, Rockland Electric Co. and Atlantic City Electric.

“This week’s BGS auction results are the culmination of several issues: rapidly increasing demand for electricity, coupled with limited supply growth due to lagging new generation interconnection, and flawed market dynamics in the PJM region,” said Christine Guhl-Sadovy, BPU president.

PJM Interconnection operates the congested mid-Atlantic electric grid through Delaware, eastern Kentucky, Maryland, New Jersey, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia and Washington, D.C., as well as small portions of Illinois, Indiana, Michigan and North Carolina.

Demand for electricity has spiked for the first time in decades. Artificial intelligence (AI), cryptomining, the broader electrification of society and bipartisan political pressure to bring manufacturing back to the U.S. are fueling new demand.

“PJM’s recent capacity auction results are the main driver of these increases. The Murphy administration will continue to aggressively push and hold PJM accountable to address rising costs by expediting interconnection and implementing additional market reforms, all of which will help drive down costs for ratepayers which is a priority for the BPU,” Guhl-Sadovy said.

The BGS auction determines, in part, the cost of electricity for most residents and many businesses for a 12-month period starting June 1.

The BPU’s authority over the auction is limited to certifying the results as consistent with market trends, it said.

Winning prices for all four companies increased compared with last year’s auction, with the average monthly bill projected to increase between 17 percent and 20 percent depending on the service territory.

The four regulated companies do not earn a profit on the cost of the electric supply secured in the auctions; they pass the costs directly to ratepayers.

“Rate counsel is deeply concerned about the outcome of the auction. There was a significant increase in prices, with the average electric ratepayer seeing an increase of over $20 per month, which have a substantial impact on New Jersey families and businesses, especially those least able to afford it,” Lipman said.

”There are a number of factors that led to these higher prices, but a significant driver is PJM and its failure to fix the capacity market. The last PJM capacity market auction cleared at its highest price in history.

“While some of that is due to an anticipated increase in the demand for electricity, most of the increase is due to PJM’s failure to fix its market rules or timely interconnect new generation supply.

“This was not simply an issue of supply and demand as PJM’s continued failure to fix its market rules and interconnection queue will lead to even higher prices in the future and slow our ability to build out our electrical infrastructure.”

Fast-tracking plants

Meanwhile, the Federal Energy Regulatory Commission approved PJM’s proposal to head off the potential for power shortages as demand for electricity grows in part because of a surge in artificial intelligence and energy-hungry data centers.

Critics, however, say the plan will effectively fast-track the construction of new natural gas plants over clean energy projects that don’t emit planet-warming greenhouse gases.

The commission’s decision, in a 3-1 vote, on Feb. 12 said PJM’s proposal is “just and reasonable and not unduly discriminatory or preferential.” The proposal was originally submitted in December.

PJM, based in Pennsylvania, has said it made the proposal because a power shortage could affect the grid as early as 2026 as demand grows for electricity at the same time coal-fired plants and aging nuclear plants are retiring.

PJM’s criteria for an eligible project includes ones that are ready to build, can provide a relatively high power capacity and are likelier to produce electricity when the grid is most likely to see power shortfalls. It said it would open an application period for proposals and select 50 to study.

Clean energy advocates say the process favors gas-fired plants, and they blame PJM for creating the existing reliability problem by taking an unduly long time to study proposed wind and solar energy projects in its project queue.

Proposals awaiting PJM’s approval are more than 97 percent solar, wind or battery storage, according to federal figures. Less than 3 percent are natural gas.

Some critics questioned PJM’s process. The Ohio Consumers’ Counsel Office said it will be impossible for consumers to know whether PJM is selecting the most efficient or cost-effective power plants.