How Rising PJM Capacity Charges Are Hitting Ohio Commercial Electric Bills in Summer 2025

Business Type: General Commercial

How Rising PJM Capacity Charges Are Hitting Ohio Commercial Electric Bills in Summer 2025

Something unexpected may have appeared on your Ohio commercial electric bill starting in June 2025: a significant, unexplained increase that you can't trace to any change in your electricity usage. Your consumption is the same. Your contract hasn't changed. But your bill is meaningfully — sometimes dramatically — higher. The culprit is almost certainly PJM capacity charges, and understanding them is the first step to fighting back.

The PJM capacity charge is one of the most misunderstood, least visible, and most impactful cost components in Ohio commercial electricity bills. It operates quietly in the background for years — then suddenly becomes impossible to ignore when PJM's annual capacity auction produces a market-moving result. The July 2024 auction produced exactly that: PJM capacity charges Ohio 2025 that are 800%+ higher than the prior year, and the impact is cascading through every commercial electricity bill in the state.

This article explains what PJM capacity charges are, how they're calculated, what the specific 2025 numbers look like, how to find them on your bill, and most importantly — what Ohio businesses can do right now to lock in lower rates before capacity charges get even worse.

What Are PJM Capacity Charges and Why Are Ohio Businesses Seeing Massive Bill Spikes in 2025?

The Fundamental Concept: Paying for Power Plant Availability

Electricity markets have a hidden complexity that most consumers never think about: the cost of making sure there's always enough power available, not just the cost of the power itself. Every kilowatt-hour you consume is delivered by a power plant — but those plants need to exist and be available before you flip the switch.

"Capacity" is the payment that electricity markets make to ensure power plants are built, maintained, and ready to operate when needed. Without capacity payments, generators wouldn't have sufficient revenue certainty to build or maintain plants, and the grid could face shortfalls during peak demand periods.

In PJM's market structure, capacity is procured through annual auctions called Base Residual Auctions (BRAs). Each auction sets the capacity price for a specific 12-month "delivery year" that begins three years after the auction. The auction's clearing price determines how much all suppliers and utilities must pay to "reserve" enough generation to meet projected peak demand plus a required reserve margin.

These capacity costs flow directly into the electricity rates paid by every commercial customer in PJM's service territory — including all of Ohio.

Why the 2025 Capacity Charges Are Historically Unprecedented

The July 2024 PJM BRA for the 2025/2026 delivery year produced results that shocked the energy industry. The clearing price in the largest zone (covering most of Ohio) jumped from approximately $28/MW-day in the prior year's auction to approximately $270/MW-day — a greater than 800% increase in a single auction cycle.

For context:

The previous record high capacity price in PJM history was approximately $167/MW-day (in 2012-2013)
The 2025/2026 price significantly exceeded that historical record
Neighboring zones with transmission constraints saw even higher prices

Three primary factors drove this result:

1. Generation Retirements Outpacing New Supply

Over 10 GW of thermal generation (coal and older gas plants) retired from the PJM footprint between 2023 and the 2024 auction, without equivalent replacement capacity coming online. Each retired megawatt of dispatchable generation reduces the supply side of the capacity market.

2. Data Center Demand Growth

PJM's demand forecast incorporated the explosive growth of data centers in Ohio and elsewhere in the PJM footprint, substantially increasing projected peak demand. Higher demand forecast = higher required capacity = higher clearing price.

3. PJM Rule Changes

PJM implemented new risk-modeling rules that increased the "accredited capacity value" of existing generators during stress periods, which increased their bid prices and ultimately the auction clearing price.

When Did This Start Affecting Ohio Commercial Bills?

The 2025/2026 delivery year began on June 1, 2025. Starting with billing cycles that encompass June 2025, Ohio commercial customers began experiencing the impact of the dramatically higher capacity prices. The lag between the July 2024 auction and the June 2025 bill impact is built into PJM's three-year forward procurement structure.

For businesses on fixed-rate contracts that were signed before the 2024 auction: your current bill reflects your locked-in rate, but the impact will hit at contract renewal.

For businesses on variable rates, pass-through contracts, or default utility service: the impact is appearing in bills now.

The Real Numbers: How Much More Are Ohio Commercial Customers Paying Due to PJM Capacity Cost Increases?

The Capacity Cost Math

PJM capacity charges on your commercial electric bill are calculated based on:

Your Peak Load Contribution (PLC) — expressed in kilowatts (kW)
The applicable capacity price — expressed in dollars per megawatt-day ($/MW-day)
The delivery year duration — 365 days

Formula: Annual Capacity Cost = PLC (MW) × Capacity Price ($/MW-day) × 365 days

At the old capacity price of $28/MW-day, a business with a 200 kW PLC would pay:

Annual capacity cost: 0.20 MW × $28/MW-day × 365 days = $2,044/year

At the new capacity price of $270/MW-day:

Annual capacity cost: 0.20 MW × $270/MW-day × 365 days = $19,710/year

Increase: $17,666/year from capacity alone — on the same building, with the same usage.

Scaled to different business sizes:

Business Size	PLC (kW)	Old Annual Capacity Cost	New Annual Capacity Cost	Annual Increase
Small retail	50 kW	$511	$4,928	+$4,417
Restaurant	100 kW	$1,022	$9,855	+$8,833
Office building	300 kW	$3,066	$29,565	+$26,499
Manufacturer	1,000 kW	$10,220	$98,550	+$88,330
Large industrial	5,000 kW	$51,100	$492,750	+$441,650

These numbers are illustrative and based on the 2025/2026 delivery year capacity price differential. Actual bill impacts depend on whether your contract passes through capacity costs directly, bundles them into a fixed rate, or adjusts them through utility riders.

How Capacity Costs Appear on Different Contract Types

Fixed-Rate All-In Contracts (pre-2024 auction): Your current bill does not reflect the capacity increase — the supplier is absorbing it. However, your renewal rate will reflect full current market conditions, including the capacity increase. Expect significant sticker shock at renewal.

Variable Rate/Month-to-Month: The capacity increase is reflected in your monthly rate immediately. Your per-kWh rate increased in June 2025 without any change in your usage.

Cost-Plus/Pass-Through Contracts: Contracts with explicit capacity cost pass-through provisions will show the capacity increase separately, often labeled as "Capacity Charge," "ICAP Charge," or "PJM Capacity Adjustment."

Default Utility Service (SSO/Standard Service): Ohio utilities are implementing capacity cost adjustments through their rate structures. The timing and exact mechanism depends on your specific utility, but the cost will flow into bills by late 2025 for most customers.

Is Your Ohio Business Overpaying? How to Identify PJM Capacity Charges on Your Commercial Electric Bill

Finding Capacity Costs on Your Bill

Commercial electricity bills in Ohio vary significantly in format depending on your supplier and utility. Here's how to identify capacity cost components:

On Competitive Supplier Invoices: Look for line items labeled:

"Capacity Charge" or "Capacity Cost"
"ICAP" (Installed Capacity)
"PJM Capacity"
"Reliability" or "Reliability Charge"
These may appear as a separate $/month charge or as a component of the per-kWh rate

If your bill shows a single per-kWh rate with no component breakdown, the capacity cost is bundled into that rate. Ask your supplier for a cost component breakdown.

On Utility Bills (if on Default Service): Look for:

"Generation Service Charge" adjustments
"Capacity Surcharge" or "Capacity Rider"
Riders labeled by utility program names

Calculating Your Implied Capacity Exposure: If you can't find explicit capacity line items, you can estimate your capacity exposure by:

Asking your supplier: "What is my current PLC?" and "What capacity price is reflected in my current rate?"
Multiplying your estimated PLC (kW) × current capacity price ($270/MW-day) × 365 / 1,000 to get annual capacity cost
Comparing to your actual bill to see how capacity is being recovered

Red Flags That Suggest You're Overpaying for Capacity

Your bill increased significantly after June 2025 without a corresponding change in usage
You're on a variable rate or default utility service
Your supplier is on a cost-plus contract that passes through capacity
You haven't shopped your electricity supply in more than 18 months
Your current contract is month-to-month or expired

If any of these apply, a competitive procurement review is almost certainly warranted.

The PLC Review: Are You Being Assessed the Right Capacity Tag?

Your PLC is set by PJM based on historical metering data during the 5-CP events of the prior summer. Errors in PLC calculation are possible — particularly if:

Your usage data was estimated rather than metered during a 5-CP event
A meter was replaced or calibrated incorrectly
Your account has had significant operational changes

If you believe your PLC may be incorrect, you have the right to request a review from your utility's capacity tag administrator. Errors can result in overpayment for capacity — and refunds or credits if the error is documented.

How Ohio Commercial Businesses Can Lock In Lower Electric Rates Before PJM Capacity Charges Get Even Worse

The Forward Market View on Capacity Prices

The bad news about 2025/2026 capacity prices is well-known. What matters for procurement decisions now is the forward outlook: what will capacity prices be for the 2026/2027 and 2027/2028 delivery years?

Market consensus among PJM analysts:

2026/2027 capacity prices: Expected to remain elevated, with some analysts projecting modest declines from the 2025/2026 record as some additional capacity enters the market; others project continued increases if plant retirements exceed new entry
2027/2028 capacity prices: More supply is expected as PJM's interconnection queue reform (FERC Order 2023) begins enabling more new generation; however, meaningful relief may not arrive until late 2027

The implication for procurement: fixed-rate contracts signed today will likely prove favorable to variable rates or contracts signed in 2026-2027, because today's market rates don't yet reflect any further capacity price increases that future auctions may deliver.

Four Strategies to Lock In Lower Rates and Reduce Capacity Exposure

Strategy 1: Competitive Fixed-Rate Procurement

The most direct strategy: work with an independent Ohio energy broker to run a competitive bid process among licensed electricity suppliers. A well-executed competitive procurement:

Gets current market pricing from 8-15+ suppliers simultaneously
Enables apples-to-apples comparison of fixed-rate offers
Locks in supply costs for 24-36 months, providing insulation against future capacity increases
Typically yields 10-25% savings vs. default utility service

Strategy 2: Aggressive PLC Reduction

Your PLC — and thus your capacity charges — can be reduced by curtailing your usage during PJM's 5-CP hours (the five highest peak hours of the summer). Strategies include:

Enrolling in peak alert notification services
Creating a documented curtailment plan for all facility loads
Pre-cooling buildings before anticipated peaks
Shifting manufacturing or processing to off-peak hours
Enrolling in demand response programs that coordinate curtailment during peak events

A 10% reduction in your PLC (from 300 kW to 270 kW in the example above) saves approximately $2,957/year at current capacity prices.

Strategy 3: Demand Response Enrollment

As discussed in our demand response guide, Ohio businesses can earn revenue from demand response programs while simultaneously reducing their PLC. The combined benefit of DR payments plus PLC reduction can be substantial — especially at current capacity price levels.

Strategy 4: Battery Storage for Peak Shaving

Battery energy storage systems (BESS) can reduce your effective peak demand by charging from the grid during off-peak hours and discharging during the 5-CP events that determine your PLC. This strategy:

Directly reduces your metered demand during 5-CP hours
Lowers your PLC for the following year
Can also provide economic arbitrage benefits by charging cheap and discharging expensive
Federal ITC (30%+) helps offset capital costs

Conclusion: Capacity Charges Are Not Going Away — But They Are Manageable

The 800%+ increase in PJM capacity charges is not a temporary anomaly — it reflects structural changes in Ohio's electricity market that will persist for years. But "persistent" does not mean "unmanageable." Ohio businesses have more tools to address capacity cost exposure than businesses in almost any other state:

The deregulated market lets you lock in competitive fixed rates
Demand response programs pay you to reduce during the peak events that set your PLC
PLC management through curtailment reduces next year's capacity cost basis
Battery storage provides a technology hedge against future capacity increases

The businesses that understand capacity charges, identify their exposure, and take proactive steps to manage it will build a structural cost advantage over competitors who simply accept the higher bills. In a market as consequential as Ohio's, that advantage matters enormously.

Find Out If PJM Capacity Charges Are Inflating Your Ohio Electric Bill

Our energy analysts will review your commercial electric bill, identify your capacity charge exposure, and run a competitive procurement to lock in lower rates before capacity costs increase further.

Get a Free Bill Analysis

Frequently Asked Questions: PJM Capacity Charges in Ohio 2025

Q: What are PJM capacity charges and why do they appear on Ohio commercial electric bills? A: PJM capacity charges are payments that electricity customers make to ensure that enough power generation is available to meet peak demand. They are a fundamental component of PJM's wholesale electricity market, designed to compensate generators for being available during high-demand periods. The charges appear on Ohio commercial bills because Ohio is within the PJM service territory and all customers share in the cost of maintaining grid-wide generation adequacy.

Q: Why did PJM capacity prices increase by 800% in 2025? A: The July 2024 PJM Base Residual Auction produced record-high prices due to: (1) accelerating retirements of thermal generation (coal and older gas plants) without equivalent replacement capacity; (2) explosive growth in projected peak demand from data centers in Ohio and throughout PJM; (3) PJM rule changes that increased the bid value of existing reliable generators; and (4) limited new generation entering through PJM's congested interconnection queue.

Q: How do I find the capacity charge on my Ohio commercial electric bill? A: On competitive supplier invoices, look for line items labeled "Capacity Charge," "ICAP," "PJM Capacity," or "Reliability." On utility bills (if on default service), capacity costs may appear as riders or adjustments to the generation service charge. If you have an all-in fixed-rate contract, the capacity cost is bundled into your per-kWh rate with no separate line item.

Q: What is a Peak Load Contribution (PLC) and how is mine calculated? A: Your PLC is your share of PJM's peak demand — measured in kilowatts. It's calculated based on your metered electricity consumption during the five highest peak-demand hours on the PJM grid during the summer (called the 5 Coincident Peaks or 5-CP). Your 5-CP average demand becomes your PLC for the following delivery year and is used to calculate your annual capacity charge.

Q: Can I reduce my PLC to lower my capacity charges? A: Yes. Since your PLC is based on your usage during PJM's 5-CP hours, reducing your electricity consumption during those specific hours lowers your PLC. This can be achieved through HVAC setpoint adjustments, production scheduling shifts, lighting reduction, and demand response program participation. Even modest PLC reductions at current capacity prices translate to meaningful annual savings.

Q: Will PJM capacity prices decrease in future years? A: Market consensus suggests capacity prices will remain elevated through the 2026/2027 delivery year (the next auction cycle), with potential for some moderation as PJM's interconnection queue reform enables more new generation to come online in 2027-2028. However, continued data center demand growth could offset this potential moderation. Locking in a fixed-rate contract now is generally considered a prudent hedge against uncertain future capacity price movements.

Q: My business is small — does capacity really matter at my scale? A: Yes. Capacity costs are embedded in every Ohio commercial electricity rate, regardless of business size. For a small retail store on variable supply with a 50 kW PLC, the 2025/2026 capacity price increase adds approximately $4,400/year to the capacity component of their electricity costs. While the absolute dollar amount is smaller than for large industrial customers, the percentage impact on total electricity spend is similar.

Q: What is the difference between "firm fixed capacity" and "capacity pass-through" in a commercial electricity contract? A: In a "firm fixed" contract, your capacity costs are included in your locked-in per-kWh rate — you pay the same rate regardless of what happens to PJM capacity prices. In a "capacity pass-through" contract, the capacity cost component of your rate adjusts with actual PJM capacity market prices, passing through market movements directly to you. In the current high-capacity-cost environment, firm fixed is generally far preferable.

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