Key Takeaways
States across the country are concerned about rising energy prices that are continuing due to a demand and supply imbalance, with AI data centers and electrification increasing demand and coal power plant retirements reducing supply.
Capacity auctions are receiving record prices in the PJM Interconnection, which covers 13 states.
In New Jersey, the Republican challenger is planning to overturn Governor Murphy’s energy transition policies and green mandate, wanting instead to provide affordable energy to New Jerseyans as electricity prices are set to rise 20% in November.
In New Mexico, NV Energy is adding a demand charge to encourage residents to spread out their energy usage and avoid simultaneous operation of their appliances.
In California, a slate of bills was signed by Governor Newsom that would supposedly lower electricity costs, among other goals.
Energy costs have been rising across the United States as demand continues to increase due to power-hungry data centers and the push toward electrification that occurred during the Biden administration. Residential electricity prices rose by 25% during his term in office. States across the country are looking at ways to stop or reduce the increases. But it may be too little too late, as reliable coal plants are being shut down and replaced by costly new systems that magnify the demand growth issues.
PJM Auction Prices Hit Record Highs
PJM Interconnection, the regional grid operator of 13 states, had its capacity auction clear at record-setting prices as electricity demand is rapidly increasing while supply growth is limited. Growing supply is made more difficult by significant delays in connecting new generation projects to the PJM grid and the retirement of coal power plants. PJM has warned states against prematurely retiring power plants and replacing them with solar and wind units. The North American Electric Reliability Corporation has also stressed in its 2025 Summer Reliability Assessment that solar and battery additions have made the resource mix less flexible and more variable.
The 13 states in the PJM Interconnection recently met to discuss the situation, as states are seeing electricity prices increase. For example, this year, energy prices increased across Pennsylvania and New Jersey, with PPL Electric getting a 16% rate increase and JCP&L getting a 19.6% increase. According to 69WFMZ, in Pennsylvania, regulated utilities like PPL Electric are prohibited from owning electric generation. Its electricity is purchased through a series of competitive auctions through PJM.
Electricity Price Increases Enter into the New Jersey Governor’s Race
Beginning in June, New Jersey residents were to receive a 20% increase in electricity prices, resulting mainly from the state’s most recent capacity auction. According to Consumer Energy Solutions, every year in February, the New Jersey Board of Public Utilities (BPU) holds an energy auction that sets the wholesale electricity price that NJ customers pay if they have not chosen a third-party energy supplier. The auction is held yearly to help lessen price volatility. The auction prices apply to about one-third of the state’s supply each year, as they are combined with prices from the previous two years’ auctions. Similar to PJM’s capacity auction, the NJ auction received record-high prices as the state closed its last two coal-fired plants in 2022 and divested its fossil-fuel generating stations in 2023.
NJ state policies, however, have exacerbated the supply problem. Governor Phil Murphy set a goal to make New Jersey’s electricity production fossil-free by 2035 and instituted other decarbonization policies, such as phasing out fossil-fuel plants. New Jersey is also a net importer of electricity from other PJM states, as it does not produce enough electricity in-state to meet demand, forcing it to buy expensive power from the regional grid. According to Gabriella Hoffman in RealClear Energy, it is estimated that NJ Governor Murphy’s green transition plan to wind, solar, battery power, and electric vehicles, if fully implemented, would result in $1.4 trillion in lost income, or $140,000 per average New Jerseyan over the next 25 years. Some family energy bills in New Jersey have exceeded $500 per month.
Via CFACT, while Jack Ciattarelli, the Republican challenger for NJ Governor, wants to overturn Murphy’s green energy mandate, ban expensive offshore wind, diversify the state’s energy sources to include nuclear and coal, and withdraw New Jersey from a multistate carbon tax plan known as the Regional Greenhouse Gas Initiative, the Democratic candidate, Mikie Sherrill wants to continue with the failed policies of Governor Murphy to the detriment of affordable energy. And, to gain an edge, she is twisting the words of Mr. Ciattarelli regarding tax increases.
Via Hoffman, the 20% rate hike that was supposed to take effect in June was delayed until September 30, after the height of the air conditioning season. On August 14, the BPU also announced a $100 Residential Universal Bill Credit to help lower bills in September and October, essentially disguising the cost of the new utility bills until after the NJ Governor’s election in November.
Nevada Public Utility Commission Approves New Charges
Some Nevada residents are expecting higher utility costs due to the state’s Public Utility Commission’s approval of a demand charge and net metering changes for NV Energy, a major Nevada utility serving over 1.4 million customers. In April 2026, NV Energy will add a monthly demand charge of $20 based on an average customer’s bill and will make changes to its net metering policy, affecting rooftop solar systems. The plan is to calculate credits for energy returned to the grid from rooftop solar systems every 15 minutes of peak usage each day, rather than monthly.
According to regulators, most residential and small business customers of NV Energy will see lower bills, adding to their already comparatively low rates. Through June, Nevada’s average retail price for residential customers was about 60% lower than California’s price and 22% lower than the U.S. average price. Last year, Nevada generated 53% of its electricity from natural gas, its smallest share in 19 years, with solar contributing 31%. Nevada imports natural gas from neighboring states like Utah.
In 2019, Nevada lawmakers set a 100% zero-carbon emission energy mandate by 2050 under former Democratic Nevada Governor Steve Sisolak. To achieve zero-emission energy by 2050, Nevada has phased out its coal plants. That means rate payers are paying for the coal plant retirements and their replacements, requiring the build out of a whole new system. Pushing for an accelerated green energy transition while phasing out reliable energy sources like coal is linked to rising utility costs and reliability issues.
According to Utility Dive, renewable advocates are against the change for net metering, saying that it would erect further barriers to renewables adoption because it would reduce annual solar customer compensation by $136. Depending on how the compensation is calculated, non-solar rooftop customers could be subsidizing rooftop customers, particularly if they are compensated at retail rates where they do not pay for the use of power lines.
Depending on usage, Advanced Energy United indicates that the demand charge could be higher than NV Energy indicates. It calculates that the new demand charge could add $27 per month to the bill of a customer using five kilowatt hours and $38 per month to customers using six kilowatt hours. NV Energy claims the new charge will not make a major difference to the new bills of an average NV Energy customer because the utility is moving some parts of the volumetric rate into the daily demand charge. Via KTNV Las Vegas, the purpose of the demand charge is to incentivize customers to decrease their overall energy usage by spreading out their energy usage and avoiding simultaneous operation of numerous appliances, which would result in less strain on the power grid during times of peak demand.
California Passes Bills to Supposedly Lower Energy Costs
According to The Hill, California Governor Gavin Newsom signed several climate and clean energy bills supposedly to “lower electricity costs, stabilize the petroleum market and slash air pollution.” The measures include legislation to increase climate credits on utility bills, expand regional power markets out West, and add $18 billion to the California Wildfire Fund. The cap-and-trade program, renamed “cap-and-invest,” was also extended through 2045.
Analysis
Energy consumers in states across the country are facing higher bills as the grid becomes strained by additional demand, particularly from artificial intelligence data centers and electrification. Unfortunately for consumers, utilities are ill-equipped to deal with these challenges because of prohibitive permitting policies and state renewable portfolio standards that incentivize intermittent wind and solar generation over natural gas and coal. To prevent consumers from being burdened with rising costs, states need to adopt “best of the above” approaches to energy policy that let the market dictate which sources are optimal to meet rising demand.
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