TRENTON, N.J. — The New Jersey Board of Public Utilities is calling for changes to the regional electricity capacity market after a new state study found the current system can no longer deliver reliable power at the lowest possible cost.
The BPU released an in-depth study Thursday examining the capacity market operated by PJM Interconnection, the regional grid operator serving New Jersey, 12 other states and the District of Columbia.
The report recommends changes involving large electricity users such as data centers, PJM’s auction structure, long-term energy contracts and the role states have in decisions affecting electricity reliability and costs.
“New Jersey ratepayers deserve a clear explanation of why their bills are rising and what can be done about it,” said NJBPU President Ben Hertz-Shargel. “The fastest way to lower bills is getting new power generation built. That requires replacing PJM’s unpredictable price spikes with modern rules that attract long-term investment while protecting customers. States must be allowed an active role in PJM governance to ensure wholesale market structures serve the public interest.”
The report was required by the New Jersey Legislature and delivered to Gov. Sherrill and lawmakers. It comes after New Jersey electricity bills increased by roughly 20% last year, driven in large part by higher costs in PJM’s capacity market, according to the BPU.
PJM coordinates the movement of wholesale electricity and manages electric grid reliability across its territory.
Capacity charges account for about 15% to 20% of a typical customer’s electric bill, according to the BPU. The agency said capacity represents the largest individual component of customers’ electricity costs that state utility commissions cannot directly set, regulate or change.
The Legislature passed legislation Aug. 25, 2025, directing BPU staff to investigate whether PJM’s capacity market, known as the Reliability Pricing Model, was continuing to serve its intended purpose and to issue a report within a year.
BPU staff examined the structure and historical performance of the market, PJM auction data, regional electricity demand forecasts and reform proposals being considered by PJM, other states and federal regulators.
Among the recommendations is a requirement that large new electricity users, including data centers, provide new power generation to the grid or accept lower-priority electric service if they do not.
New Jersey has already enacted both requirements into state law, and the BPU has begun work on implementing them, according to the agency.
The report also recommends modernizing PJM’s market design by considering a shift from one annual auction to a seasonal structure intended to more closely match electricity supply with actual conditions.
The BPU also recommends considering a move to a “prompt” auction using more current electricity forecasts rather than setting prices three years in advance.
Another recommendation calls for expanding long-term contracting options. The BPU said longer-term financial guarantees could reduce the effects of price volatility on customers while helping energy companies obtain financing to construct new power generation.
The report also recommends changing PJM’s governance rules to provide states with a greater role in decisions that affect electricity reliability and affordability.
The BPU said it plans to use the report’s framework to pursue reforms through PJM’s stakeholder process and before the Federal Energy Regulatory Commission.
New Jersey is also working with other states and stakeholders on changes to PJM governance and the process used to determine how regional transmission lines are planned and paid for, according to the BPU.
The agency said it will continue developing changes governing how businesses and utilities interact with PJM’s markets, including new rates for data centers, its Virtual Power Plant proceeding and utility business model reform.
Over the next year, the BPU also plans to use new statutory authority to regulate local transmission projects, which the agency said have increased rates while often failing to bring lower-cost renewable energy into New Jersey from elsewhere in PJM’s territory.
The full report, “An Investigation of PJM’s Capacity Market,” is available through the New Jersey Board of Public Utilities.
