EAGLEVILLE, PA — Wholesale electricity costs across the PJM Interconnection territory climbed sharply during the first quarter as rising capacity prices, transmission congestion, and growing electricity demand tied partly to data center expansion pushed regional power costs significantly higher, according to the grid operator’s independent market monitor.
Monitoring Analytics, the Independent Market Monitor for PJM, reported the total cost of wholesale power rose 75.5% from a year earlier to $136.53 per megawatt-hour during the January-through-March period.
The increase reflects mounting pressure on the nation’s largest wholesale electricity market as artificial intelligence infrastructure, electrification trends, and tighter reserve margins drive demand growth faster than new generation and transmission capacity can be added.
“Our analysis concludes that the results of the capacity market auctions for the 2025/2026, 2026/2027, and 2027/2028 Delivery Years were not competitive, primarily as a result of forecast demand for data centers,” Independent Market Monitor Joseph Bowring said in the report.
PJM coordinates electricity markets and grid operations across 13 states and the District of Columbia, including Pennsylvania, New Jersey, Maryland, Ohio, and Virginia.
Real-time wholesale energy prices increased 67.8% from a year earlier, with the average locational marginal price rising from $52.20 per megawatt-hour to $87.57.
Monitoring Analytics attributed the increase primarily to higher fuel costs, transmission constraints, and market-power pricing impacts during periods of grid stress.
Capacity costs posted the sharpest increase. Total capacity costs rose nearly 400% year over year, accounting for more than $14 per megawatt-hour of the overall wholesale power increase.
The report tied much of the upward pressure to projected electricity demand growth from large-scale data center development, particularly across PJM markets serving Northern Virginia and other rapidly expanding technology corridors.
Electricity demand within PJM also continued climbing. Average real-time hourly load increased 3.1% during the quarter compared with the same period in 2025.
The generation mix shifted unevenly during the quarter. Natural-gas generation rose 4.2%, while oil-fired generation surged 43.2% during periods of elevated winter demand and tighter system conditions.
Solar generation increased 15%, while wind generation declined 4.7% from a year earlier.
The report also highlighted worsening transmission congestion costs across the PJM system.
Total congestion charges paid by customers increased more than 300% year over year to roughly $2 billion during the quarter.
Monitoring Analytics argued existing flaws in PJM’s Financial Transmission Rights market structure have prevented customers from fully recovering congestion-related revenues.
“Customers have received $6.8 billion less in congestion revenues than customers should have received” since the 2011/2012 planning period because of weaknesses in PJM’s FTR market design, the report stated.
Despite concerns surrounding the capacity market, Bowring concluded PJM’s energy market itself remained broadly competitive during the quarter, with prices generally tracking generators’ operating costs.
The full report is available at Monitoring Analytics.
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