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Competitive Landscape of PJM Wholesale Electricity Markets

The report released by Monitoring Analytics, the Independent Market Monitor for PJM, highlights the competitive status of the wholesale electric energy market in the first half of 2025. This evaluation encompasses a detailed analysis of the market structure, participant behaviors, and overall performance across the 13 states and the District of Columbia managed by PJM Interconnection. Joseph Bowring, leading the Independent Market Monitor, indicated that while certain markets showed competitive outcomes, the capacity market auction did not exhibit similar competition.

Energy Prices Surge

One of the significant findings from this report is the increase in energy prices compared to the same period in 2024. The load-weighted average locational marginal price (LMP) saw a substantial rise, moving from $31.70 to $51.75 per megawatt-hour (MWh), reflecting a notable 63.2% increase. Contributing factors to this hike included:

• - Fuel and consumables costs: Rose by $11.61 per MWh, accounting for 57.9% of the increase.
• - Transmission constraint penalties: Added an additional $3.15 per MWh.
• - Market power components: Increased prices by $1.52 per MWh.
• - Scarcity components: Contributed $1.68 per MWh to the overall hike.

Interestingly, during extreme heat in June, the pre-emergency demand response actions taken by PJM increased the LMP by 6.2%. However, this increase was buffered due to an administrative cap imposed at $3,700 per MWh, slightly lowering the LMP rise.

Factors Driving Costs

The total wholesale power cost rose from $53.86 per MWh in the first half of 2024 to $76.15 in 2025, marking a startling 41.4% increase. This escalation can be attributed to significant contributions from energy (64.6%), capacity (8.4%), and transmission charges (24.7%). Notably, for the first time since Q3 2019, transmission costs per MWh surpassed those of capacity.

While energy prices were determined primarily by units operating near their short-run marginal costs, this did not hold true in all instances. Certain high markups among marginal units did impact pricing dynamics, showing that competitiveness in the market can vary.

Generation Shifts

A clear shift in generation sources occurred in the first half of 2025 compared to the same period in 2024:

• - Coal generation increased by 18.2%.
• - Natural gas output decreased by 3.0%.
• - Oil generation saw a rise of 35.6%.
• - Wind and solar generation also witnessed gains of 5.6% and 49.0%, respectively.

Net Revenues and Uplift Charges

An essential metric for evaluating market performance, net revenues for new generation technologies saw significant increases. The net revenue for new combustion turbines grew by 37% while new solar installations also recorded a 67% rise in revenue. Despite these positive trends, total energy uplift charges soared by $398.5 million in 2025, a staggering 235.2% increase from 2024.

In conjunction with this, the congestion revenue amassed during the reporting period hit $1,264.7 million, showcasing an 80.3% increase. However, only a fraction (55.8%) of this congestion charge has been returned to customers, leading to widespread discussions on the efficacy of the FTR market design. The design flaws have resulted in customers not receiving $4.9 billion in expected congestion revenues dating back to 2011.

Oversight and Future Directions

The Independent Market Monitor plays a critical role in reviewing PJM's market operations, signaling how effective rules and regulations can be optimized to benefit customers. The objective remains to ensure the competitiveness and fairness of the PJM wholesale electricity markets while addressing the regulatory gaps that have led to recent revenue discrepancies.

For further information, the full report can be accessed through Monitoring Analytics’ official website.