Gas plants have already led to higher prices. One of the reasons that capacity auction prices are higher this year is because of the widespread failure of gas plants in recent winter storms. Gas power plants in the region that were rated previously by PJM as 92-95 percent available fell to 62-79 percent in this auction. Gas plants and pipelines are more likely to fail during extreme weather, whereas wind, solar, and storage are able to provide reliable power in extreme temperatures. We saw this to be the case most notably in Winter Storm Uri in Texas and Winter Storm Elliot in the Midwest and Northeast.
But instead of taking that as a cue to diversify away from gas, PJM is doubling down. PJM recently asked the federal government to approve a plan that would fast-track gas power plants in the queue over the (mostly clean) resources that have been waiting for years to connect to the grid. Gas is far more expensive than clean energy, so fossil energy companies need PJM to put its thumb on the scale to overcome unfavorable economics.
PJM is parroting GOP and fossil fuel talking points in this effort, claiming that relying on renewables would break the grid and that gas is needed for reliability. Meanwhile, back in reality, PJM got less than 5 percent of its electricity from wind and solar in 2023. Other grid regions like SPP and ERCOT managed a grid with 37 percent and 31 percent wind and solar energy, respectively, without issue in 2023. PJM’s claims would be laughable if they weren’t so deadly serious for our climate and for families’ budgets. Rather than fixing the jammed queue itself, PJM is focused instead on letting gas plants cut in line.
What Can We Do About It?
PJM is running its next energy auction in July, which could lead to even further rate increases if action isn’t taken now. Pennsylvania Governor Josh Shapiro recently sued to get PJM to fix issues in its next auction process to avoid an additional $20 billion in cost increases. PJM should certainly lower the cap on auction prices and include “reliability must-run” resources in this auction. Issues will remain, however, until PJM solves underlying problems with the interconnection queue.
PJM must work to speedily reform and reopen its regular-order interconnection queue process, including by fully implementing FERC Order 2023’s “first-ready, first-served” cluster study requirements. PJM has thus far refused to do so. Interconnection issues, including high network upgrade costs that cause prospective projects to drop out of the queue, are ultimately downstream of transmission constraints. PJM must robustly and quickly implement FERC Order 1920 and begin proactively planning and building new transmission so that new resources can come online to meet rising power demand without astronomical grid upgrade costs hanging over their heads.
PJM has recognized that this situation is untenable and is asking FERC to approve changes to its Surplus Interconnection Service process, which allows new projects to take advantage of existing interconnection agreements that aren’t using their full capacity. FERC should approve this request, while rejecting other asks such as PJM’s gas fast-track proposal (the “Reliability Resource Initiative”) that would violate FERC fairness and non-discrimination doctrines.
States can also take steps to keep down energy bills and ensure PJM works to keep costs down. Other states can follow the lead of Pennsylvania and consider leaving PJM unless PJM truly works to reform interconnection and prevent future price hikes.
States can also soften the blow of price hikes by increasing annual energy efficiency targets for utilities through their Public Utility Commissions, implementing cap-and-invest programs like RGGI or PACER in Pennsylvania that return money directly to ratepayers, or limiting utility’s guaranteed rate of return while utilities are using their influence within PJM to resist changes that would have prevented these rate hikes.
States can also increase PJM and utility accountability by requiring PJM to provide voting reports of key PJM committees to increase transparency and sunshine PJM actions to the public.
Additionally, states should work to streamline projects and technologies that would prevent future rate hikes. State legislatures can streamline siting and permitting for clean energy and transmission projects so that energy can be added to the grid more quickly. They can also require utilities to deploy grid-enhancing technologies and virtual power plants that get more capacity out of the existing transmission grid and demand-side resources.
The Bottom Line
The cause of these massive rate hikes can sound complicated. But the bottom line is that low-cost clean energy is the solution to bring down sky-high electricity bills for millions of Americans. We need more of it, and we need it now. Only by allowing cheap solar, wind, and storage projects to come online quickly will we prevent future cost increases. PJM’s inaction has already caused one massive rate hike. That is already one too many.
