For many Pennsylvanians, the rising cost of simply keeping the lights on is becoming a major economic burden. Electricity prices in the Keystone State have surged in recent years, increasing nearly 19 percent in the last year alone and 46 percent since 2018, according to the U.S. Energy Information Administration. This isn’t a matter of market forces alone; a complex interplay of factors, centered around the state’s unique electricity market structure, is driving up costs for consumers and businesses alike. Understanding these dynamics is crucial to addressing the growing affordability crisis and ensuring a reliable energy future for Pennsylvania.
At the heart of the issue lies the wholesale electricity market, managed by PJM Interconnection. PJM runs auctions to secure enough power plant capacity to meet future demand, and the costs associated with these auctions have skyrocketed. Payments to ensure power plants remain available have ballooned from $2.2 billion to over $16 billion in recent auction cycles, as reported by PJM. These costs are then passed directly onto consumers through their monthly electric bills. The situation is particularly acute in Pennsylvania, where a restructured electricity market leaves utilities with limited control over wholesale prices.
Understanding PJM and Its Impact on Your Bill
PJM Interconnection serves 67 million people across thirteen states and the District of Columbia, including all of Pennsylvania. While not a household name, PJM’s decisions have a direct and significant impact on the price of electricity. The organization conducts auctions to guarantee sufficient power generation capacity to meet anticipated demand. Utilities are required to purchase this capacity to maintain grid reliability. When auction prices increase, those costs are inevitably reflected in consumer bills.
Recent auction cycles have seen dramatic price increases. In one instance, capacity prices rose by more than 800 percent. A recent “State of the Market” report from PJM’s independent market monitor revealed that overall wholesale electricity costs in the region jumped 56 percent in 2025, fueled by growing demand from data centers and delays in bringing recent power plants online. These escalating costs aren’t confined to the energy sector; they permeate the entire economy, impacting the price of goods, services, and everyday necessities.
Pennsylvania’s Unique Situation: Restructuring and Its Consequences
Pennsylvania’s electricity market underwent significant restructuring in recent decades, separating power generation from regulated utilities. The original intent was to foster competition and lower prices. But, this restructuring has created a situation where utilities have limited control over ensuring adequate and affordable power generation. They primarily manage the transmission infrastructure but must purchase electricity from competitive markets like PJM, where independent power producers benefit from price surges.
This differs from states like Virginia, which maintain vertically integrated utilities. The Pennsylvania Independent Fiscal Office has noted that residential electricity prices in Pennsylvania are now higher than in Virginia, despite similar levels of data center development. This suggests that the state’s market structure is contributing to the higher costs. Unlike their counterparts in Virginia, Pennsylvania’s utilities are not able to directly control power generation, leaving them vulnerable to fluctuations in the wholesale market.
It’s important to note that Pennsylvania’s electric utilities themselves do not profit from high wholesale prices. When PJM costs increase, those costs are passed through to customers, with utilities investing in grid expansion without a profit markup. The profits, instead, accrue to independent power producers who sell capacity at auction.
The Path Forward: More Generation and a Smarter Structure
The fundamental economic principle of supply and demand is at play. As electricity demand increases – driven in part by the proliferation of data centers and the increasing adoption of artificial intelligence – and supply remains constrained, prices will inevitably rise. Pennsylvania needs to increase its electric generation capacity and implement policies that support this growth.
A key step is revisiting outdated laws that prevent utilities from owning their own power plants. In states with vertically integrated utilities, power production costs are often more stable because the plants provide a hedge against market volatility. These utilities are not forced to purchase power at peak prices and can proactively plan long-term investments in generation and transmission infrastructure. Allowing Pennsylvania’s utilities to regain control over power generation could help stabilize prices and ensure a more reliable energy supply.
Lawmakers on both sides of the aisle have already recognized the demand to increase energy production, a promising sign of bipartisan cooperation. The stakes are high, not only for Pennsylvania’s economic future but also for the financial well-being of its residents. Getting the state’s electric system right is essential, as it impacts nearly every aspect of daily life.
Joy Ditto is CEO of Joy Ditto Consulting and former CEO of the American Public Power Association and the Utilities Technology Council.
The Pennsylvania legislature is currently considering several bills aimed at increasing energy production and reforming the state’s electricity market. Further action is expected in the coming months, with a focus on streamlining the permitting process for new power plants and exploring options for restoring greater control to utilities. Stay informed about these developments and their potential impact on your energy bills.
What do you think about the rising cost of electricity in Pennsylvania? Share your thoughts in the comments below and share this article with your network.
