PJM Prices Spike After Record Peak Demand in June

PJM Interconnection braced for its biggest stress test yet this year as a heat wave rolled through the northeastern U.S. in late June. In preparation for the heat wave, the RTO issued a “Hot Weather Alert,” which proved necessary, as it was forced to issue “Maximum Generation Alerts,” “Load Management Alerts,” and even implement “Demand Response” in the following days in an effort to keep blackouts at bay.

As the heat wave arrived, PJM would document record load as it peaked on June 23^rd at just over 160 GW, breaking the previous record by 8.5 GW. Then, on the 24^th, PJM saw load reach similar highs, just 2.5 GW lower than the previous day. These load levels far surpassed the load PJM experienced throughout the rest of June, as the grid, on average, pulled 40 GW less than it did on the 23^rd. This stress that was placed on the grid caused demand response measures to be taken to avoid the risk of blackouts in select regions on the 23^rd and for the balancing authority as a whole on the 24^th.

Interestingly, despite the higher load on the 23^rd, the 24^th experienced higher prices overall. The peak LMP was consistently traded in the Potomac Electric Power Company’s (PEPCO) load zone in the Washington D.C. area. Prices hit just under $1,500 per MWh on the 23^rd and about $2,100 per MWh on the 24^th. The hub with the lowest prices across those two days was the Chicago Generation Hub, but its prices on the 24^th, hitting just over $1,500 per MWh, still outpaced PEPCO’s pricing from the previous day.

These higher prices on the 24^th can likely be explained by the higher temperatures PJM as a whole weathered and its impact on the available reserves. As summer temperatures increase, the operating capacity of thermal plants, which make up the bulk of PJM’s fuel mix, can potentially be limited, thus reducing the power production capabilities within the region and, likewise, its reserves. The 23^rd saw reserves drop below PJM’s reserve requirement, but the 24^th saw even higher temperatures than the previous day, with the average temperature across the region increasing by over two degrees. This caused reserves to drop even further below PJM’s reliability reserve requirement of 9.3 GW, with reserves plummeting to a mere 5 GW due to temperatures discounting capacity factors and relatively unchanged load. This low supply paired with relatively unchanging demand seems to be the driving cause of the lower reserves and higher overall pricing that PJM experienced despite its load being marginally lower on the 24^th.

As load continues to grow across the country, supply will need to keep up or higher prices like those seen on the 23^rd and 24^th will become more frequent in the coming years. The impacts of these increasing loads, demonstrated by higher power prices, may appear in the upcoming results of PJM’s capacity auction for the 2026/2027 delivery year, which are set to be released later this month. However, it remains to be seen whether the newly established price floor and cap put on this auction will be enough to keep supply online in the region while keeping bills for ratepayers manageable. As the market continues to adapt to growing load, changing regulations, and experience unforeseen events, especially in the face of high-stress events, be sure to stay up to date with more FactSet Energy Insights covering U.S. and global power markets.

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