Understanding the PJM Base Residual Auction Changes
4 min readInterested in understanding how the electricity market ensures there’s enough capacity to meet peak demand and maintain grid stability? The PJM Base Residual Auction (BRA) plays a critical role in this process. By understanding the basics of the BRA, the reasons behind recent delays, the expected timeline for future auctions and options available to customers, businesses can make informed decisions and plan effectively.
Exploring the PJM Base Residual Auction
The PJM BRA is typically held annually and secures commitments from electricity suppliers to provide capacity to meet the forecasted demand for electricity in the PJM region. As a requirement for the PJM BRA, capacity market sellers, such as power generators, are required to offer their resources for a one-year term, traditionally three years in advance. This process ensures there is enough generation or load-management capacity to meet peaks in demand, maintaining a stable and reliable supply for customers.
Reasons Behind the Delays
To understand the current state of the PJM BRA, it’s important to look back at the delays that created uncertainty in the market. The PJM BRA for the 2022/2023 delivery year, originally scheduled for May 2019, was postponed multiple times and eventually held in May 2021. These delays were primarily due to regulatory changes associated with the implementation of the Minimum Offer Price Rule (MOPR).
Insights from the 2025/26 PJM Base Residual Auction
The 2025/2026 PJM BRA brought significant changes and higher prices. Capacity prices for PJM’s most recent BRA for the June 2025 through May 2026 period increased by over 800% for much of the PJM region compared to the PJM-wide prices for the period from June 2024 through May 2025. Various factors contributed to these results, including power plant retirements, higher peak summer demand, a higher Installed Reserve Margin (IRM), and notable market reforms approved by the Federal Energy Regulatory Commission (FERC). These market reforms included changes aimed at better reflecting risks from extreme weather and addressing system reliability. As a result, businesses across PJM’s footprint, including parts of Maryland, Delaware, DC, Virginia, Pennsylvania, Ohio, New Jersey and Illinois, will see higher capacity costs beginning in June 2025. These changes will affect all energy providers in the PJM region.
Expected Timeline for Future Auctions
The delays and regulatory changes from previous auctions have affected the scheduling and planning of future auctions, leaving market participants with less advance visibility into future capacity prices. Historically, PJM capacity auctions provided a clear view of capacity costs three years into the future. However, due to recent delays, that has not been the case.
Currently, capacity prices are known only through May of 2026. The base auction for the 2026/2027 delivery year, which was originally scheduled for December 2024, has been delayed to July 2025. This delay continues to impact customers’ ability to plan and make informed decisions based on future capacity prices.
Looking ahead, subsequent base auctions are expected to be held approximately every six months in an attempt to try to catch up to the traditional auction schedule and provide market participants with more advance visibility into future capacity auction results.
Impact on Customers
Looking ahead, we have already seen FERC approve a number of additional changes to be implemented with the 2026/27 BRA. How these changes may affect future capacity auctions is still unclear, adding another layer of complexity for businesses planning their energy strategies.
As businesses plan for future budgets, it’s important to be aware of the recent changes affecting capacity markets in PJM, the 2025/26 auction results and the current status of the market. As mentioned above, businesses across PJM are facing higher capacity costs starting in June 2025. These changes in costs will affect all energy providers operating within the PJM region.
Options Available to Businesses
When evaluating energy supply options, it is important to consider the current market dynamics and understand the periods for which capacity auctions have cleared versus those that may still be unknown. Given the auction delays and additional reforms already made for capacity periods 2026-2027 or potentially forthcoming through 2029-2030, many customers are considering how best to approach capacity in their upcoming electricity procurements. Two options that some customers are considering are:
- Opting for passing through their capacity costs altogether
- Opting for a product that includes a baseline capacity cost from which adjustments upward or downward will be made once actual costs become known (after each applicable period’s auction clears).
These options enable customers to avoid paying additional risk premiums to potentially fix a cost that would still be subject to change if subsequent market reforms are later approved or implemented. Additionally, passing through capacity costs allows customers to realize cost savings, if they successfully manage their peak load contribution or take other actions to reduce future capacity obligations. Businesses should weigh the pros and cons of various approaches to see which direction would work best with their individual needs.
Empower Your Energy Strategy
Understanding capacity market dynamics and product options is key to making informed decisions. Constellation provides a variety of solutions to help manage your electricity costs. Whether your business needs procurement options or solutions to help drive down costs through peak load management or energy efficiency, our energy experts are here to help you navigate these complexities and optimize your energy strategy.
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