By Avi Salzman

Rising power demand from data centers is causing a surge in electricity prices and could lead to reliability problems ahead, the results of a multistate electricity auction indicate.

PJM, a nonprofit that oversees the electric grid for 65 million consumers in 13 states and the District of Columbia, said late Wednesday that power companies who provide it with generation capacity in 2027-2028 will be paid the highest allowable price, $333.44 per megawatt-day. That is a record.

It's a slight increase from the last auction, and an enormous jump from the 2024-2025 auction, which came in at $29.92 per megawatt-day. Capacity auctions are designed to pay power plants for being available to meet demand, including on high-demand days like during a heat wave. Generation plants are also paid directly for the energy they produce through daily auctions.

PJM covers states including Pennsylvania, New Jersey, Virginia, and Maryland. In many other states, utility commissions approve the prices power companies receive for the electricity they generate.

The total cost to electricity consumers from this auction is expected to be $16.4 billion. That won't hit consumer bills just yet, but it could eventually add more cost pressure at a time when customers in some states are already paying over 20% more for electricity than they did a year ago.

PJM also said that it didn't obtain enough capacity through the auction to meet its reliability requirement, a standard meant to protect against power outages during one-in-a-decade emergency events. The auction came up 6.6 gigawatts short, or about the amount of electricity that can be produced by six large nuclear reactors.

PJM representatives said that there may not be such a large shortfall in 2027 because supply and demand could change before then.

"This auction leaves no doubt that data centers' demand for electricity continues to far outstrip new supply, and the solution will require concerted action involving PJM, its stakeholders, state and federal partners, and the data center industry itself," said PJM executive Stu Bresler in a statement.

Power providers within PJM, including Constellation Energy, Vistra, Talen Energy and NRG, have benefited from the higher capacity prices. But some analysts worry that they'll soon see a backlash, which could force regulators to reduce capacity payments to some power-plant operators.

"I think in this political reality where you have gubernatorial elections in key states in PJM next year, you're setting this up as an obvious question on how you can actually reduce bills," said Jefferies analyst Julien Dumoulin-Smith, in an interview before the auction. "It's a precarious place" for utilities.

Write to Avi Salzman at avi.salzman@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

December 17, 2025 17:43 ET (22:43 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.