Beginning June 2025, PJM capacity prices will reflect a nearly 900% increase — a dramatic market shift that will now be largely locked in through May 2028. For the next two planning years, PJM has established a floor of $175/MW-day and a ceiling of $325/MW-day for capacity costs. These thresholds are designed to stabilize the market, but for customers, it means elevated capacity prices are here to stay for the foreseeable future.

Suppliers are taking vastly different approaches to pricing capacity beyond May 2026. Some are using the five-year historical average, others are applying the new price floor, and very few are using the latest PJM auction prices directly. This inconsistency creates confusion — and significant risk — for customers locking into long-term agreements. Importantly, almost all supplier contracts already allow for upward adjustments if non-energy costs like capacity charges increase.

Pricing capacity below current market levels creates a false sense of security and leads to misleading price comparisons, especially given the high likelihood of future non-energy cost increases being passed through. In most cases, a “fixed” price is not truly fixed.

Adding to the complexity, some suppliers are offering what can only be described as “buy now, pay later” schemes. They’re allowing customers to delay capacity price increases if they renew contracts immediately, folding the higher costs into the new contract price. But this comes at a hidden cost, often with implied interest rates in the double digits. Worse yet, these contracts typically do not protect customers from future capacity cost increases — they allow upward adjustments but offer no guarantee of relief if market prices decline.

At EnerNova, we strongly recommend capacity as a pass-through charge — not bundled into a fixed price. Pass-through capacity provides customers with full transparency, ensures any reductions in capacity prices or Peak Load Contributions (PLCs) flow directly to the bottom line, and protects against suppliers baking hidden premiums into fixed rates.

Remember: Most supplier contracts allow adjustments when costs rise, but not when they fall.

Bottom Line: In a rising capacity market, buyer beware. Transparency and strategic contract structuring are more critical than ever.