HWNEWS
America's biggest power grid underbought capacity by 4 GW and locked $12B of extra costs onto household bills. The next auction is the lever.
PJM Interconnection, the operator of America's largest electricity grid, has signed about $12 billion in extra capacity costs onto the bills of 66 million households and businesses through 2027. Electricity bills across the PJM footprint are already up roughly 20% over the past two years, Semianalysis notes. The error compounds through the annual capacity auction, which pays power plants to be available to keep the lights on and signs multi-year contracts, so the bill keeps coming even as power demand surges around new data centers.
PJM's Reserve Requirement Study, the model the grid operator uses to decide how much capacity to buy, has underestimated the capacity the system already has by roughly 4 gigawatts, about four large nuclear reactors' worth, Semianalysis's Energy Model team argues after reconstructing the model from public filings and behind-the-meter data. Because the auction signs contracts that run for several years, that gap compounds into roughly $12 billion of obligations across the 2025/26 and 2026/27 cycles.
A better-calibrated model would have procured just 14 megawatts less power for 2025/26 and saved $6.7 billion, Semianalysis estimates. In a later period, the same analysis points to $4.9 billion in savings against about 0.8 gigawatts of additional procurement. The fix is a tighter fit to the capacity already on the system.
The Independent Market Monitor, the regulator-mandated watchdog at Monitoring Analytics, published its analysis of the 2027/2028 RPM Base Residual Auction in July 2026, reviewing the same auction whose inputs the Reserve Requirement Study feeds. The model itself is documented in PJM's 2025 Effective Load Carrying Capability and Reserve Requirement Study. E3, an energy consultancy, independently evaluated it in December 2025 in a report filed to PJM's stakeholder process. The 2025 State of the Market report supplies the official baseline on prices and reliability outcomes.
Avanza Energy's independent Substack coverage frames the same data-center driven surge in capacity costs at a $16.4 billion scale, a different total, but the same diagnosis: a planning process and an auction that lock in capacity costs before the load materializes.
PJM owns both the planning model and the auction that consumes its output, so an underestimate compounds through multi-year contracts rather than self-correcting. PJM's emergency procedures can also sign reliability contracts without committed counterparties, which Semianalysis flags as a way to add obligations to household and business bills without anyone on the other side of the trade.
PJM's capacity auction runs every year, and the next cycle is the on-ramp before another multi-year obligation is signed. The Independent Market Monitor's July 2026 review and E3's December 2025 evaluation are already on the record. The change required is narrow: tighten the Reserve Requirement Study so it sees the 4 gigawatts the system already has, and the next auction will buy less of what isn't needed.