Here’s the bottom line-your electricity bill is going to rise in June 2025. There’s no way around it. Capacity rises are set to rise 800%. How did this happen?
In this article, I will explain how we got here, what this means for you and your business, and what you can do to mitigate the increases on your electricity bill.
What is capacity, and why is up 800%?
Capacity and PJM
Capacity refers to the amount of electricity a generator can produce when it’s running at its full capability. This maximum amount of power is typically measured in megawatts (MW) or kilowatts and helps utilities project just how big of an electricity load a generator can handle.[1] Electric customers are charged for capacity, in their electricity bills. In Illinois, capacity is typically 20-25% of an electric bill.
PJM controls the transmission of wholesale electricity to thirteen states, including Illinois.
Every year, PJM holds a capacity auction. These auctions are held so that power plants can prepare for the expected electricity demand. This allows power plants to hedge themselves against upswings in demand and adequately prepare.
PJM is supposed to hold auctions to buy reserve electricity three years in advance of when it’s needed. When lower supply sparks higher auction prices, generators then have plenty of time (three years) to adjust and prepare. PJM has not held a three-year forward auction since 2018.[3] Today, auctions are usually one year in advance.
In summer 2024, PJM’s auction, for 2025, resulted in an 800% increase in capacity costs. Please see below for a comparison of previous year prices and the latest auction.
Note: Resource clearing prices are represented in price per Megawatt Hour. Since most customers deal in KWH, to simplify, in 2024/2025 year, the price, as shown was .02892. This current price, set to pass through in June 2025, will be .2692. That is a huge price increase that will get passed down to the customer.
The projected number for 2026/2027 is only set to increase, when the auction is held in July 2025. The auction was originally scheduled for December 2024, but delayed by six months.
There are a number of factors which have caused the drastic increase in capacity prices.
How did these capacity price increases happen?
Demand has increased exponentially.
Although the AI and crypto currency boom has been exciting, both these products require a lot of energy generation to exist. This has placed increased demand on data centers to produce energy that wasn’t needed ten years ago. The rise in electric vehicles also plays a role in the increased demand. With the rise of electric vehicles, there is more electricity needed to keep these vehicles charged. There has also been an increase in manufacturing, which also places strain on the power grid.
None of these things are inherently bad. They’re simply facts that the unprecedented amount of demand needed is greatly outpacing the supply.
As shown in the graph below, ComEd is projecting that electricity demand will only increase. This will place further strain on the power grid, as the demand rises and supply remains stagnant. This increase in demand is reflected in the resource clearing price, the previous .02892/KWH price vs. the June 2025 .2692/KWH price.
Fossil fuel has been phased out, without the adequate renewable sources to replace it
Renewable energy sources are undoubtedly great for the environment. However, the closure of
fossil fueled power plants has not been replaced with renewable energy resources. There is a stark imbalance of closures vs. openings. The renewable energy sources in place have not been plentiful enough to keep up with the demand. Furthermore, aging infrastructures are not being replaced, causing these power plants to become unreliable resources. Note: even if power plants were to begin to be built, PJM is notoriously slow to approve projects and any fast tracked project will likely not be online until 2030. [6]
Here’s the bottom line: electricity prices, as a whole, are going to drastically increase. Capacity prices are imbedded into the electrical supply price. This will cause strain on small businesses. ComEd, back in August 2024, estimated that the price will only rise by 1.5-2 cents per KWH.[7]
What Does this Mean for Me and My Business?
We believe that it may be higher, with increases to come in June 2026. Capacity charges are currently at .015. Capacity is increasing 800%. That brings the price increase now to .12. Capacity is currently about 20% of the electric price. The current ComEd price is .065. Prices could end up being anywhere from 11-13 cents per KWH.
It is unlikely that 2024 prices will return for a very long time. The huge increase from .02892/KWH to the June 2025 .2692/KWH price will take years to remedy.
What Can I do to Help Alleviate these Capacity Costs?
Work with LBE, Ltd. to secure a fixed, locked in price.
A fixed rate will protect your business against cost increases.
We have been in business for 30 plus years, and we know energy. We work with several suppliers to get you a competitive rate. Will a June 2025 price still be higher than what you’re paying now? Likely yes. If we can secure a rate a couple cents below the ComEd rate, a win for your business is still a win, and can amount to thousands of dollars saved a month.
Secure a longer term deal
The issues, causing this capacity increase, outlined in this post, are massive and take years to remedy. Power plants are not built up and running within three months. Prices are unlikely to go down for a few years. Securing a fixed price, at a longer term, protects your business from further increases in price. With every price increase, your business budget has to increase to pay for the electric bill.
These are going to be hard times, in the electricity market. We’re here to help your business continue to thrive, despite the turbulent economic times. Contact us today via phone, email, or the form on our website, to discuss your account and help secure a competitive rate.
See also https://lbeltd.co/five-reasons-why-you-need-an-energy-broker
[1] https://www.energy.gov/ne/articles/what-generation-capacity#:~:text=maximum%20power%20output.-,Capacity%20is%20the%20amount%20of%20electricity%20a%20generator%20can%20produce,load%20a%20generator%20can%20handle.
[2] Source: https://www.pjm.com/-/media/DotCom/library/reports-notices/load-forecast/2025-load-report.pdf, page 9
[3] https://www.citizensutilityboard.org/blog/2024/11/06/pjm-broke-the-capacity-auction-but-heres-how-they-can-fix-it/#:~:text=PJM’s%20capacity%20market%20is%20supposed,advance%20of%20when%20it’s%20needed.
[4] https://www.pjm.com/-/media/DotCom/markets-ops/rpm/rpm-auction-info/2025-2026/2025-2026-base-residual-auction-report.pdf, page 7
[5] https://www.pjm.com/-/media/DotCom/library/reports-notices/load-forecast/2025-load-report.pdf; page 31
[6] https://www.canarymedia.com/articles/transmission/how-pjm-can-get-the-power-that-it-needs-and-fast
[7] https://www.citizensutilityboard.org/blog/2024/08/12/cub-qa-capacity-price-spike-means-comed-supply-price-will-shoot-up-june-2025/
