EAGLEVILLE, PA — PJM Interconnection’s wholesale electric energy market produced competitive results in the first half of 2025 despite significant price increases, according to the 2025 Quarterly State of the Market Report released by Monitoring Analytics, LLC, the independent market monitor for PJM.
Covering a region that spans 13 states and the District of Columbia, PJM manages the largest wholesale electricity market in the United States. The report assesses market performance, participant behavior, and structural competitiveness across PJM’s energy, capacity, and transmission markets.
Competitive Outcomes Amid Rising Costs
Joseph Bowring, the independent market monitor, reported that PJM’s energy market remained competitive during the first six months of the year. However, the report concluded that the capacity market auction for the 2025/2026 delivery year was not competitive, reflecting structural inefficiencies that continue to affect pricing and customer costs.
Energy prices climbed sharply compared to the first half of 2024. The real-time load-weighted average locational marginal price (LMP) rose 63.2%, from $31.70 per MWh to $51.75 per MWh. The increase was driven primarily by higher fuel costs, which accounted for nearly 58% of the price hike, as well as transmission constraints, scarcity conditions, and elevated market markups for certain marginal units.
Despite these pressures, the market monitor found that prices were generally set by units operating close to their short-run marginal costs, indicating broadly competitive behavior in energy dispatch.
Wholesale Power Costs and Transmission Impacts
The total cost of wholesale power increased 41.4%, rising from $53.86 per MWh in the first half of 2024 to $76.15 per MWh in 2025. Energy costs made up 64.6% of this total, followed by transmission charges at 24.7% and capacity costs at 8.4%.
Transmission constraints remained a significant factor. Congestion costs soared to $1.26 billion, an 80.3% increase from the same period last year. Yet, only 55.8% of congestion costs paid by customers were returned through allocated revenues, leaving consumers with less value from the system’s financial transmission rights (FTR) mechanism. The report highlights persistent flaws in FTR market design, noting that from the 2011/2012 planning period through 2024/2025, customers have received approximately $4.9 billion less in congestion revenues than they should have under a fully effective framework.
Shifts in Generation Mix
PJM’s generation profile continued to evolve in early 2025. Compared to the first half of 2024:
- Coal generation rose 18.2%.
- Natural gas output declined 3.0%.
- Oil generation surged 35.6%.
- Wind output grew 5.6%.
- Solar generation jumped 49.0%, reflecting accelerating renewable integration.
This diversification contributed to maintaining reliability amid rising demand, as the real-time average hourly load increased 3.6% year-over-year, from 87,764 MWh to 90,914 MWh.
Investment Incentives and Market Pressures
The report also highlighted significant changes in net revenues, a key metric influencing investment in new generation. Theoretical net revenues rose sharply for several resource types:
- Combustion turbines: +37%
- Combined-cycle plants: +42%
- Coal plants: +192%
- Nuclear facilities: +54%
- Diesel units: +688%
- Renewables (wind and solar): +67%
However, total uplift charges — payments designed to compensate generators when market revenues fall short of costs — increased 235% year-over-year, reaching $568 million.
Balancing Competition and Consumer Impact
While the report affirms that PJM’s energy market remains broadly competitive, it also underscores persistent structural challenges. Rising prices, growing congestion costs, and capacity market inefficiencies present ongoing concerns for consumers, regulators, and policymakers.
With electricity demand increasing and renewable integration accelerating, PJM’s market design faces continued scrutiny to ensure both reliability and affordability in one of the nation’s most critical power regions.
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