Impact of PJM's 2025/2026 Capacity Market and Reliability Must-Run Units on Maryland Electric Customers
PJM Interconnection LLC (PJM) is the entity responsible for operating the electricity grid in the Mid-Atlantic region and surrounding states. To ensure that there is sufficient electricity generation capacity to meet peak demand and maintain reliability standards, PJM administers a capacity market. This market is crucial for procuring the necessary capacity through annual competitive auctions.
On July 30, 2024, PJM released the results of its latest capacity market base residual auction (BRA) for the upcoming 2025/2026 delivery year, which will take place from June 1, 2025, to May 31, 2026. This auction revealed an astonishing increase of more than 800 percent in system-wide capacity prices compared to the previous BRA for the 2024/2025 delivery year, marking a price spike that is unprecedented within PJM’s history.
As a result of these surging capacity prices, electric customers across the entire PJM footprint can expect a total annual cost of $14.7 billion starting June 1, 2025. This figure represents a significant jump from the $2.2 billion in capacity costs incurred during the 2024/2025 delivery year. The rise in prices can be attributed to several factors: (1) an increase in electricity load, (2) various changes to market rules that alter the valuation of supply (such as generation) in the capacity market, and (3) a decrease in the available capacity supply caused by plant retirements and retirement-related "reliability-must-run" (RMR) arrangements.
In light of these developments, the Maryland Office of People’s Counsel has commissioned Synapse to conduct an analysis. This study aims to assess the potential impacts of the capacity market changes and the RMR arrangements on the rates that Maryland’s electric utility customers will be required to pay.