Electricity Cost Increase Coming June 2025: What You Can Do About It

An unexpected announcement from the PJM Grid at the end of July revealed a significant increase in electricity costs. The Residual Base Auction for Capacity Costs resulted in a record high of $269.00 per MW/Day, representing a 900% increase in capacity costs for all customers on the PJM Grid.

What does this mean for electricity consumers?

All electricity users will see an increase of $0.015 to $0.025 per kWh added to their current electricity rate, potentially resulting in a 15 to 25% increase in total electricity costs.

Understanding the Basics

What is the PJM Grid?

The PJM Grid is an electrical grid covering most Northeastern United States, including utility suppliers like FirstEnergy.

What are Capacity Costs?

Capacity Costs are payments to ensure sufficient electrical supply during high-demand periods. They're similar to a mall maintaining a large parking lot year-round in anticipation of busy shopping seasons.

Impact on Consumers

1. This increase will affect everyone, regardless of existing contracts.
2. The cost increase may seem small, but it adds up quickly for large consumers.
3. The new rates will take effect in June 2025 and run through May 2026.

Reasons for the Cost Increase

1. Addition of numerous data centers, especially AI data centers.
2. Increased weather-related demand due to climate change.
3. Shutdown of older power-producing plants.

What Can You Do?

1. Change Your Electricity Procurement Strategy
• Consider passing through costs instead of fixing them or switching to a managed index solution for larger users.

2. Explore Efficiency Projects
• Conduct an energy audit
• Upgrade to LED lighting
• Improve power quality
• Upgrade HVAC systems and building controls

3. Participate in a Demand Response Program
• These programs pay qualified participants to reduce consumption during high-demand periods.

Looking Ahead

Experts predict that capacity charges will continue to increase, with Morgan Stanley already forecasting a 157% increase for June 2026 through May 2027.

By taking proactive measures and working with energy experts, you can mitigate some of these extra costs and better prepare for the upcoming changes in electricity pricing.

If you have any questions about the information in this article or about the measures you can take to mitigate some of these cost increases, contact Chuck Valenches at 216.453.2516.

TPI Efficiency is the preferred energy and LED partner for Manufacturing Works and a proud member since 2016.