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Gov. Shapiro Reaches Agreement With PJM To Prevent Unnecessary Price Hikes And Save Consumers Over $21 Billion On Utility Bills

On January 28, Gov. Josh Shapiro announced he has reached an agreement with PJM Interconnection on a plan to resolve his recent lawsuit and to save consumers over $21 billion over the next two years.

In December, Governor Josh Shapiro filed a complaint with the Federal Energy Regulatory Commission (FERC) against PJM Interconnection, criticizing flaws in PJM’s capacity auction design that threatened to impose significant new price increases.

The agreement will avoid historic price hikes on consumers across all 13 states PJM serves, including Pennsylvania.

Left unaddressed, PJM’s next capacity auction scheduled for July 2025 would have resulted in billions in unnecessary energy costs for 65 million people across the region.

The Governor worked with PJM to significantly lower the capacity auction price cap – from over $500/Megawatt-Day to $325/MW-Day – and averting a runaway auction price that would have unnecessarily increased energy bills.

The Commonwealth is a leading producer of energy and the nation’s largest exporter of electricity – nearly a century ago, Pennsylvania helped to found PJM, and today still serves as a generation backbone for the region.

At the same time it has led this fight against unnecessary price increases on consumers, the Shapiro Administration is committed to meeting the need for new generation by getting more power projects built in Pennsylvania as part of an “all-of-the-above” energy strategy to create jobs, reduce emissions, and ensure safe, reliable, affordable power for Pennsylvanians for the long term.

“When PJM’s next auction was set to result in historic price hikes, I filed a lawsuit to stop this price hike on consumers and defend Pennsylvanians,” said Governor Shapiro. “PJM did the right thing by listening to my concerns and coming to the table to find a path forward that will save Pennsylvanians billions of dollars on their electricity bills. My Administration will continue to work to ensure safe, reliable, and affordable power for Pennsylvanians for the long term.”

PJM operates a capacity market, which means that operators are paid to commit to providing energy in the future.

Over the last several years, demand for energy has risen rapidly but PJM has been slow to allow new power sources onto its grid – and as a result, PJM capacity prices have skyrocketed.

PJM’s 2025/26 capacity auction, held in July 2024, resulted in costs of $14.7 billion – an over 800 percent increase from the prior year.

The Governor pushed PJM to reduce their price cap, and a diverse coalition came together support the Governor’s message, including four governors, energy and consumer advocates, and the Organization of PJM States (OPSI).

The Shapiro Administration’s energy leadership promises to save the PJM region over $21 billion on utility bills in the next two years.

PJM and the Shapiro Administration have agreed to a path forward for the complaint, subject to consultation with PJM members and the PJM Board of Managers.

In order to avoid further delays to the auction schedule, PJM will soon seek a FERC order by proposing a cap and floor mechanism through an FPA section 205 filing with the FERC.

This resolution follows over a year of engagement with PJM. Governor Shapiro continues to repeatedly press for long-term solutions that address increasing costs, urging PJM to:

-- Reopen their closed interconnection queue to get new projects online, like the restart of Three Mile Island in Pennsylvania;

-- Rely on member states to help determine which projects are ready and to speed up project approvals like the Governor has done in Pennsylvania;

-- Implement new best practices established by FERC in order to be better prepared in extreme weather scenarios and ensure affordable, reliable power year-round; and

-- Reform the capacity market to more accurately reflect real world conditions, ensuring grid reliability while saving consumers money on their utility bills.

Click Here for Gov. Shapiro’s announcement.

Reactions

Senate Republican Leader Sen. Joe Pittman (R-Indiana) issued this statement on the PJM agreement--

“The governor has touted an agreement this week with PJM, the grid operator for our electricity. This announcement does nothing to make energy less expensive in Pennsylvania.

“The claim of $21 billion in savings is something consumers of electricity will never see materialize because rates will continue to rise even under this agreement.”

Click Here for a video of Sen. Pittman’s entire Senate Floor remarks.

Click Here for a transcript of Sen. Pittman’s remarks.

Natural Resources Defense Council’s Jackson Morris, Director of State Power Sector Policy, issued this statement on the agreement--

“Governor Shapiro's historic agreement with PJM protects Pennsylvanians from billions of dollars in electricity price gouging.

“This deal buys Pennsylvania, neighboring states, and PJM time to deal with the real problems – PJM’s six year delay connecting new power plants and the risks of blackouts from wintertime gas plant failures.

“We hope the work of the Shapiro administration marks the beginning of a new era of coordination between PJM and the states.

“We look forward to working with all stakeholders to ensure PJM's rules protect consumers, bring new clean, reliable generation online, and deliver a more affordable economy for all.”

NewsClips:

-- Utility Dive: PJM Agrees To Lower Price Cap For Upcoming Capacity Auctions

-- Post-Gazette-Ford Turner: Shapiro, PJM Electric Grid Operator Reach Deal As Top PA Regulator Predicts ‘Spikes’ In Cost

-- WHYY/BillyPenn: PJM Electric Grid Operator Agrees To Shapiro Demand On Power Price Cap

-- The Center Square: New Shapiro Deal Could Dampen Shock Of Anticipated Price Spikes By PJM Electric Grid Operator

-- PA Capital-Star: Shapiro Announces Settlement With PJM To Prevent Billions In Extra Electricity Costs

-- Pittsburgh Business Times: Shapiro Reaches Deal With PJM To Limit Electricity Price Hikes For PA Consumers

Resource Links:

-- Gov. Shapiro Threatens To Pull Pennsylvania Out Of PJM If It Does Not Protect Consumers Against Soaring Power Prices [PaEN]

-- Pennsylvania’s Electric Grid Is Dependent On One Fuel To Generate 59% Of Our Electricity; Market Moving To Renewables + Storage [PaEN]

-- PJM Electricity Auction Price 9 Times Higher Than Previous Auction-- $269.92/MW-Day For 2025/26 Delivery Compared To $28.92/MW-Day In 2024-25; Extreme Weather Risk Big Factor [PaEN]

-- PennFuture: Dramatic PJM Electricity Price Increases Due To Forced Outages Of Gas Power Plants; Huge Backlog Of New Generation Projects; Demand Growth Driven By Data Centers, Cryptocurrency Mining [PaEN]

-- Natural Resources Defense Council: The Cost Of Slow-Walking Clean Energy Can Be Seen In Latest PJM Electricity Prices [PaEN]

-- PJM Interconnection: Extreme Cold Produces PJM Record For Winter Electricity Demand; Maximum Generation Alert Remains In Effect Into Thursday [PaEN]

-- Utility Dive: North American Electric Reliability Corp: Natural Gas Electric Generation Is Threatened This Winter By Ongoing Concerns About Gas Production, Delivery In Extreme Weather Conditions [PaEN]

-- PJM CEO Expresses Concern About Electric Generating Capacity: Higher Prices Have Incentivized Some Generators, But Building Gas Generators Has Slowed, Permitting, Supply Chain Issues Hamper Renewables [PaEN]

-- PUC Invites Stakeholder Comments On The Issue Of The Adequacy Of Electricity Supplies In Pennsylvania [Background On Electricity Supply Issue] [PaEN]

-- 30 Stakeholder Comments Received By PUC On Adequacy Of Electricity Supplies In Pennsylvania; Increasing Natural Gas Power Plant Reliability To 90-95% Would Mean No Imminent Capacity Problem [PaEN]

-- PA Senate Republicans Reintroduce Bills To Eliminate State Appeals Of Pipeline Permits; Limit Grounds For Appeal Of Any DEP Permits; Punish Communities For Protecting Their Constituents Against Shale Gas Drilling Impacts [PaEN]

PA Oil & Gas Industry Public Notice Dashboards:

-- PA Oil & Gas Industrial Facilities: Permit Notices, Opportunities To Comment - February 1 [PaEN]

-- DEP Posted 89 Pages Of Permit-Related Notices In February 1 PA Bulletin [PaEN]

Related Articles This Week - Natural Gas:

-- PUC: Calendar Year 2024 Act 13 Drilling Impact Fees To Remain Same As 2023; Dramatic Decline In Financial Support From Shale Gas Industry Continues [PaEN]

-- Range Resources And MarkWest Liberty Midstream File Legal Challenges To The 2,500 Foot Shale Gas Facility Setback Ordinance Adopted By Cecil Township, Washington County [PaEN]

-- Conventional Oil & Gas Industry Compliance With 2022 DEP Methane Reduction Regulation Put On Hold Pending Outcome Of Litigation [PaEN]

-- DEP Releases 2 Contracts For Bidding In Next Round Of Conventional Oil & Gas Well Plugging: 12 Wells In Kinzua State Park, McKean County, 18 Wells In Warren County [PaEN]

-- Rep. Vitali Introduces Bill To Restore DEP Authority To Increase Conventional Oil & Gas Well Plugging Bonds To Prevent Hundreds Of New Well Abandonments A Year [PaEN]

-- PA Republican Senator To Introduce Bill Suspending State Taxes On Natural Gas Producers; Cut DEP Permit Fees; End Drilling Moratorium On DCNR Lands; Exempt Coal-Fired Power Plants From EPA Regulations [PaEN]

-- DEP Invites Comments At March 5 Hearing On Title V RACT 3 Air Quality Permit For Hazleton Generation Natural Gas Power Plant In Luzerne County [PaEN]

-- Gov. Shapiro Proposes ‘Lightning’ Energy Plan To Increase & Diversify Energy Generation; Reduce Climate Changing Pollution; Lower Energy Costs; Create Jobs [PaEN]

-- Gov. Shapiro Reaches Agreement With PJM To Prevent Unnecessary Price Hikes And Save Consumers Over $21 Billion On Utility Bills [PaEN]

-- PA Senate Republican Leader: ‘Every Consumer Of Electricity In This Commonwealth Is Going To Pay More;’ ‘What You’re Going To Face Is Going To Be Really Unpleasant’ [PaEN]

-- Republicans On PA Senate Environmental Committee Report Out Bills To Eliminate Carbon Pollution Reduction Program Covering Power Plants, Establish Independent Energy Office [PaEN]

-- Inquirer: President Wants US To Be ‘Leading’ Producer Of Non-Fuel Minerals; Here’s How PA Could Help; Rare Earth Elements Could Be More Important Than Expansion Of Fracking [PDF of Article]

NewsClips:

-- The Energy Age Blog: Range Resources & MarkWest Liberty Midstream File Legal Challenges Against 2,500 Foot Shale Gas Setback Ordinance In Cecil Twp., Washington County

-- The Energy Age Blog: EQT Should Plug These Abandoned Conventional Wells In Peters Twp., Washington County Before Fracking From Mingo Well Pad

-- PennLive Guest Essay: Natural Gas Industry Operations [Wastewater Pipelines] Are Strongly Regulated In PA - By Marcellus Shale Gas Coalition [Shale Gas Wastewater Pipelines are NOT regulated by the PUC for construction, operations and safety. Read more here. ]

-- Inquirer: President Wants US To Be ‘Leading’ Producer Of Non-Fuel Minerals; Here’s How PA Could Help; Rare Earth Elements Could Be More Important Than Expansion Of Fracking [PDF of Article]

-- NYT: Oil, Gas Companies Embrace New President, But Not ‘Drill, Baby, Drill’ [No Plans To Increase Production Unless Prices Rise Significantly]

-- US EIA: Electric Power Sector Has Driven Rising PA Natural Gas Consumption Since 2013

-- UGI Gas Division Filed A Request With PUC To Increase Residential Gas Rates By 10.8%

-- Scranton Times: UGI Seeking To Raise Natural Gas Rates 10.8% For Residential Customers

-- Utility Dive: Calpine To Sell 2 PA Gas Power Plants To Avoid Market Power Concerns From Constellation Merger

-- Reuters: Diversified Energy To Buy Permian Basin Oil & Gas Producer Maverick In $1.3 Billion Deal [Diversified Specializes In Buying Old Wells]

-- Bloomberg: US Natural Gas Producers Likely To Gain Asian Market Share [China Buying 50% More US LNG, Cap Price At $10 - Currently $3.89]

-- Bloomberg: Europe’s Gas Traders Now Fear Summer More Than Winter

-- Reuters: Venture Global Given FERC OK To Start Up Another Louisiana LNG Gas Export Plant

-- Reuters: US EIA Sees 7% Higher US Wholesale Power Prices In 2025; Residential Increase Of 2%

-- Wall Street Journal: New Federal Administration Memo Orders Agencies To Broadly Pause All Federal Grants, Loans, Financial Assistance Programs Pending Review [PDF of Article]