Gov. Shapiro is suing to limit electric bill hikes affecting millions in the Mid-Atlantic, including Philadelphia residents.
Philadelphia: Gov. Josh Shapiro is taking action against rising electricity costs that are set to impact residents and millions in the Mid-Atlantic region. This includes folks in Pennsylvania, New Jersey, and Delaware.
Starting this July, people in the Philly area can expect their electric bills to jump by 10% over the next two years. This is due to increased fees for electricity generation, known as capacity costs, announced by PJM Interconnection last year.
On top of that, PECO customers just faced a 10% rate hike this month, with another smaller increase coming next year. These hikes were approved by the Pennsylvania Public Utility Commission.
Energy experts say these capacity costs are already set in stone and can’t be contested. They stem from a capacity auction last year involving power companies across PJM’s service area, which covers 13 states and D.C.
This auction is meant to ensure there’s enough electricity available, especially during extreme weather. However, payments to power plants are expected to soar from $2.4 billion to $14.7 billion over the next two years, leaving ratepayers to foot the bill.
Now, Shapiro and consumer advocates are asking a federal agency for help to stop these price hikes. They argue that PJM’s auction process is flawed and want the Federal Energy Regulatory Commission (FERC) to intervene and lower future power costs.
The complaint filed by the Shapiro administration claims that Pennsylvania ratepayers could face the largest unjust wealth transfer in U.S. energy market history due to these capacity auctions.
Lawyers for the state believe that if PJM is forced to lower its cap on future capacity costs, it could save consumers $20 billion in additional bill hikes by 2026 and 2027, including $4 billion for Pennsylvania residents.
Experts say PJM has struggled to manage the shift from coal to renewable energy sources, leading to a backlog in processing new power plant applications. This has slowed down the construction of new plants, which are needed to meet growing demand.
As PJM runs capacity auctions, the fees are supposed to ensure enough power is available during peak times. However, recent rules have led to a massive increase in capacity fees, which will be passed on to consumers starting this summer.
In its complaint, the state argues that PJM’s cap on capacity costs is too high and asks FERC to change the formula used to determine these caps to better protect consumers.
High capacity costs are meant to encourage companies to build more power plants, but the slow approval process has hindered this. The state claims that the time from application to construction should be about 18 months, but it’s currently taking around six years.
This delay could lead to fewer new power plants and increased risks of blackouts during storms. Additionally, PJM has been holding auctions every year instead of every three years, which complicates long-term planning for companies.
Last month, PJM proposed some changes to its pricing model that might lower future capacity costs, but the state believes these won’t be enough.
PJM has stated it’s open to solutions but emphasizes the need to keep the lights on, warning of potential power shortages due to rising demand.
While Shapiro’s lawsuit focuses on costs, it has sparked debates about the transition to renewable energy and its impact on Pennsylvania’s energy sector. Some lawmakers criticize the administration’s legal battle over the Regional Greenhouse Gas Initiative, which aims to reduce carbon emissions.
Renewable energy advocates argue that PJM’s methods favor natural gas over cleaner energy sources, which could exacerbate climate change.
