On July 22nd, 2025, the PJM Interconnection (PJM) announced the results of its 2026/2027 Base Residual Auction (BRA), held earlier in July of 2025. The Auction was conducted under the continuation of a compressed auction schedule where the auction occurred just 10 months prior to the start of the delivery year, which represents another significant deviation from the typical three-year horizon between the auction and the delivery year.

Price Cap and Price Floor Implementation

This most recent auction was notable for the implementation of a Price Cap and Price Floor on the Variable Resource Requirement (VRR) Curve (demand curve). The Price Cap was set at $329.17/MW-UCAP, while the Price Floor was set at $177.24/MW-UCAP. These same price controls will also be in effect for the 2027/2028 BRA expected to be held later this year in December.

The introduction of the Price Cap and Price Floor resulted from negotiations led by Pennsylvania Governor, Josh Shapiro, following a December 2024 lawsuit filed with federal energy regulators due to the substantial capacity price increases that resulted from the 2025/2026 BRA held in August 2024. Ultimately, the Federal Energy Regulatory Commission (FERC) approved the negotiated price controls for this past auction in April 2025.

Auction Results and Pricing Impact

The auction cleared 134,205.3 MW of Unforced Capacity (UCAP) with Reserve Margin of 18.9% and a resource clearing price of $329.17/MW-UCAP for all Locational Deliverability Areas (LDAs). This represents a 22% price increase from the 2025/2026 clearing price for the majority of the Regional Transmission Organization (RTO), resulting in a total cleared MW times clearing price of $16.1 billion.

A simulation of the auction without the administratively set Price Cap and Floor showed that the cleared UCAP and Reserve Margin remained the same, but the resource clearing price increased to $388.57/MW-UCAP for all LDAs, resulting in a total cleared MW times clearing price of $19.0 billion.

Future Auction Schedule

The next BRA for the 2027/2028 delivery year is scheduled for December 4-10, 2025, with results expected to be published on December 17, 2025. Following that, subsequent BRA auctions are scheduled for: 2028/2029 in June 2026, 2029/2030 in December 2026, and 2030/2031 in May 2027. If the May 2027 auction timeline remains, it will restore the BRA schedule to its normal three-year horizon.

Anticipated Load Growth and Customer Actions

The primary driver of higher capacity prices is the anticipated load growth. For the 2026/2027 delivery year, PJM expects an additional 5,500 MW of demand. With an already tight supply and demand balance and the next auction rapidly approaching in December with little time for any additional supply response, the expectation is that the next auction will also clear at the administratively set cap of $329.17/MW-UCAP.

Customers looking to mitigate the impact of these prices can explore Peak Response and Demand Response programs. For more information, please contact your Freedom Energy sales representative.

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