Welcome to our explainer series, taking important topics and going deeper!
What is happening?
Back in February, the New Jersey Board of Public Utilities (BPU) approved the Basic Generation Service auction. This auction, which serves most New Jersey customers, establishes the electric supply prices for electric utilities. The results of the auction are such that starting June 1, 2025, PSE&G residential electric customers will see an increase in their bill.1
Why?
Prices are rising for many necessary items. And there is a skyrocketing demand for electricity, after an era of general stability from the early 2000s through the 2010s. This spike in demand is driven in large part by the expansion of data centers. By 2028, data centers could take up 6.7% to 12% of US energy consumption.2 The electrification of residential homes and vehicles does play a role, but is not the primary driver in icreased demand and should not deter people from choosing more energy-efficient homes and lifestyles. Even business as usual requires an update to the grid.
As we talked about in our explainer about the electricity grid, our wholesale electricity market is PJM, who supplies PSE&G, and is experiencing this explosion in demand while its capacity market is very behind.
PJM needs new infrastructure. State siting and permitting programs have not kept up with the demand for new investment. New Jersey customer bills include three main costs managed by PJM: energy, capacity, and transmission. Energy cost refers to the costs of producing electricity on the PJM grid, capacity ensures the reliability, making sure there is enough electricity generation for the demand, and the transmission is the cost of operating.
If the demand for electricity is rising, what about the supply?
The PJM interconnection queue backlog is so prevalent that they are still working through requests from 2021, and a new service request entering the queue today will not receive a service agreement until approximately 2027! There are nearly 1600 projects, 79 of which are in NJ, and about 96% are clean energy projects. That amounts to 234,000 MW in clean energy capacity and another 16,000 MW of natural gas capacity, outstanding in PJM’s interconnection queue. Reliability will continue to suffer if we do not increase new generation, or decrease load growth.
Is it because of renewable energy?
It’s undeniable that clean energy growth has saved ratepayers money- without those resources entering the market, capacity prices could have been 60% higher, costing an additional $1 billion in the coming year. Fossil fuel companies falsely blame renewable energy transitions for price hikes to push for more fracking and gas burning plants. However, PJM’s current energy generation mix is overwhelmingly coal and gas. Wind and solar represent less than 4% of the overall mix. A more balanced energy market with clean energy sources leads to stability and is less affected by global events, such as geopolitical, climate, and international gas demand.
This price increase is a direct function of the last capacity auction that increased the cost from $25 per m-day to over $280 per MW-day or over 100% increased- this increase was caused by increasing electricity demand- the majority of which was in VA not NJ and derating the capacity of mostly coal and gas plants that were not able to supply capacity when called on during winter storm Elliot increasing demand in some parts of PJM and lower supply caused the majority of the increase.
What can you do?
What you can do to lower your energy bill:
Get a home energy audit! Make your home more energy efficient so that your energy bills will be lower.
Sign up for community solar! Subscribers can save anywhere from 10-20% on your electric bills.
Get help paying your bills! Help is available for customers who are struggling to pay their energy bill.
Want to learn more?
We will be sharing our explainers every month. If there are topics you’d like to know more about, please email info@sustainableprinceton.org.
- https://nj.pseg.com/-/media/pseg/public-site/documents/paymentassistance/bgs-electric-rate-increase-21225.ashx ↩︎
- https://www.wri.org/events/2025/5/managing-skyrocketing-us-electricity-demand-state-and-local-perspective?apcid=0065832dbb41868dfaddd500 ↩︎
- https://www.pjm.com/ ↩︎
- https://gridstrategiesllc.com/wp-content/uploads/National-Load-Growth-Report-2024.pdf ↩︎
