By Brad Viator and Alison Williams

These days, partisan alignment on public policy issues is as rare as a vegetarian in southeastern Texas.

But in early July, nine governors, Republicans and Democrats alike, sent a letter to the PJM Board of Managers, whose energy market is responsible for shockingly high rate increases across 13 states and D.C. The governors say that “market participants, consumers and the states” that participate in PJM are having a “crisis in confidence” in the beleaguered grid operator. PJM likely has never been the recipient of such organized, cross-party discontent in its 100-year history.

At the heart of the PJM problem is the inability of the grid operator to bring new generation online quickly enough to match skyrocketing demand for electricity. This shortfall is manifesting directly into exorbitant energy costs. The crisis of timely and affordable generation is largely attributable to a combination of factors: decreased supply because of coal and gas plant retirements, and increased demand because of electrification and data center expansion.

The governors wrote that PJM’s response to this capacity challenge “has been typified by halting, inconsistent steps and rising internal conflicts within the stakeholder community.” According to a report from Reuters, “new projects totaling about 46 GW — enough capacity to power 40 million homes — have been cleared in recent years,” but they are not being built because of PJM’s painful bureaucratic delays and market-based shortcomings.

Just how bad is PJM’s current electricity shortfall? Consider the recent capacity auction that closed July 22. (See PJM Capacity Prices Hit $329/MW-day Price Cap.) Electricity prices soared to $329.17/MW-day — and were it not for a measly price cap orchestrated by Pennsylvania Gov. Josh Shapiro (D) earlier this year, the auction price would have reached $389/MW-day. (See FERC Approves PJM-Pa. Agreement on Capacity Price Cap, Floor.) One could argue that the cap worked in practice if not in principle; the capped price still represents a 22% jump over last’s auction price and a whopping 1,100% more than the clearing price two years ago. (See PJM Capacity Prices Spike 10-fold in 2025/26 Auction.)

And let’s not lose sight of who’s paying the price — customers. The New York Times on July 23 referenced the president and chief executive of multistate electric utility Exelon, saying that “some of his customers in Maryland, for example, could pay an additional $1 to $4.50/month as a result of the auction, depending on their location.”

Fundamentally, the PJM market is broken. Higher prices are supposed to signal energy producers to bring new capacity online. But because of PJM’s deep dysfunction, new generation is not showing up, even at exorbitant prices. Yet, PJM’s capacity auction press release essentially is a humble brag that their market is functioning.

In reality, though, capacity inside PJM is about the same as it was in 2024. More alarmingly, the auction cleared its reliability requirement by the slimmest of slim margins at 139 MW over the required threshold to have a functional market. That translates to a miniscule buffer of 0.001% of the capacity total of 134,311 MW. In other words, the market was a stone’s throw away from collapse.

Everyone knows we need more electricity. It’s painfully clear PJM is not capable of responding to increased demand.

But is there a better path forward that would make the PJM markets more reliable at creating new capacity? The answer is yes.

PJM needs to look to the southeastern U.S., where states like Georgia and Louisiana are attracting new data centers by adding capacity quickly and cost-effectively. This is not occurring by happenstance but rather through sensible planning between regulated utilities and their state regulators in public service commissions, who are being mindful of costs, growth and timing. While PJM cannot become a state regulator, it can plan like one by streamlining its processes and reforming poor functions to bring new capacity in a way that balances reliability and affordability — something utilities in vertically integrated markets never lose sight of.

Further, if PJM behaved more like a PSC and prioritized proper planning and adequate power availability, this would also help solve another of the grid operator’s most pressing challenges: the interconnection queue consisting mostly of non-dispatchable renewable energy that is unlikely to materialize because of a stack of challenges, including tariffs, supply chain problems, sunsetting tax credits and the same exact megawatts of renewables existing in other interconnection queues.

If PJM actually planned to strategically locate dispatchable generation, such as natural gas, it could make some of the renewables projects more viable by allowing those two sources to operate hand-in-glove to ensure stable energy day and night.

One thing is clear: PJM cannot afford to continue to take a passive approach to capacity. The grid operator must be decisive, act quickly and be willing to make hard choices about the future of the region’s energy supply. PJM also must be prejudicial in its decisions — identifying and prioritizing the energy sources it believes are real and shovel-ready commitments and then locating them in optimal places to ensure those sources are developed and brought online efficiently.

Finally, as a first step to reforming PJM, the nine governors are urging the RTO to appoint two new members to open seats on its board through a transparent process with input from those state executives. The letter states: “They must be individuals who understand the concerns of ratepayers facing rising costs.” (See State Governors Seeking Ability to Nominate 2 Members to PJM Board.)

Adding two new board members is a good first step. But it is an insufficient change to PJM’s underlying structural flaws. PJM must revise its mentality to act more like a PSC and focus on building new, dispatchable generation capacity — such as natural gas — that can both stand on its own and aid in renewables deployment. If utility regulation can work in the Southeast to build new capacity, there is no reason PJM, with its massive footprint, can’t do the same through smarter planning.

Brad Viator and Alison Williams are energy consultants at B Strategic Solutions.