Grid Operator PJM Proposes Market Reforms Amid Rising Electricity Costs
The nation’s largest electricity grid operator calls for market reforms after record prices drove up consumer bills across the region in 2025.
VALLEY FORGE, PENNSYLVANIA — The nation’s largest electricity grid operator has outlined potential reforms to address record-breaking electricity prices that have driven up consumer bills across the region over the past year.
PJM Interconnection, based in the Philadelphia suburbs near Valley Forge, released a report Wednesday calling on power plant operators, investors, utilities, and consumers to consider changes to the wholesale electricity market amid high demand from data centers and tightening supply.
The grid operator has faced scrutiny as record electricity prices in its auctions contributed to increased bills for consumers and businesses throughout 2025.
Market Stress and Supply Challenges
According to the report, growing demand from data centers and broader electrification of the economy has strained the system. The situation has been worsened by older power plants retiring and supply chain and permitting issues that prevent new facilities from being built quickly enough.
“The PJM region is now navigating a convergence of three structural forces that have pushed the system into disequilibrium,” the report states. “The result is a transition from an era of managing surplus to an era of managing scarcity — one that is anticipated to persist for some time based on current projections.”
The organization’s pricing model relies on what it calls the “shared reliability compact,” where all customers share the same reliability standard and agree to pay for maintaining it.
Board Response to Price Volatility
PJM’s board acknowledged that while price volatility may be economically rational, it is creating unsustainable stress on the compact between customers and the grid operator. The board has directed PJM staff to reexamine fundamental assumptions about operating in a resource-constrained environment.
The report also suggested that government intervention in the electricity market has deterred investors by undermining the credibility of economic signals that would typically encourage construction of new generation facilities.
Constellation Energy Plant Orders
The challenges facing the regional grid have prompted federal action, with U.S. Energy Secretary Chris Wright ordering two fossil fuel-fired power plants to remain operational beyond their planned retirement dates. Constellation Energy’s Eddystone Generating Station in Delaware County is among the facilities required to maintain readiness to produce electricity.
PJM serves 13 states and the District of Columbia, managing electricity distribution for approximately 65 million people. The organization coordinates the flow of electricity across a region that includes major metropolitan areas and industrial centers throughout the Mid-Atlantic and parts of the Midwest.
The grid operator’s report comes as energy infrastructure faces increasing pressure from rapid technological changes and shifting demand patterns. Data centers, which require massive amounts of electricity to operate, have emerged as a significant factor in regional energy planning.
