Would Less Competition Really Lead To Lower Electricity Prices?
Will America’s regional power grids have adequate generation capacity to avoid major spikes in electricity prices seen in recent winter storms during the depth of the coming summer? As the United States moves past what has hopefully been the worst of the winter, this question of resource adequacy and how it will be derived during the summer is becoming top of mind and raising new arguments in an age-old competition between public utilities and independent power providers (IPPs).
Electricity Prices Spike On The PJM Grid
The PJM regional grid - which encompasses a wide swath of the northeast, including Pennsylvania, Ohio, Virginia, West Virginia, and New Jersey - became a centerpiece of this controversy after wholesale electricity prices spiked during the deep freeze in late January. Prices exceeded $1,800 per kilowatt hour (kwh) in Dominion Energy’s Virginia region, which is home to the world’s largest datacenter cluster.
Such price spikes during severe weather events are common in deregulated power markets. In Texas, for example, wholesale prices hit ERCOT’s then-existing price cap of $9,000/kwh during 2021’s catastrophic Winter Storm Uri, leading officials there to lower the cap to $5,000/kwh. During January’s Winter Storm Fern, the wholesale price peaked at a less disastrous $1,800/kwh.
Such weather emergency-driven events inevitably make big news which gives rise to debates over public policy and whether market reforms are needed and advisable. One major PJM utility, Exelon, responded to January’s spike with the release of a report which claims that additional utility generated power “could reduce total PJM customer costs by $9.6–$20.0 billion in the 2028–2029 delivery year.”
