Americans are increasingly concerned about the strength of the economy, with the cost of living consistently ranking as their top priority. Few costs matter more than electricity prices, especially in Pennsylvania. The U.S. Energy Information Administration recently ranked Pennsylvania second in the nation for electricity price increases, with rates rising nearly 19 percent in one year and 46 percent since 2018.

In Pennsylvania, the primary driver is the wholesale electricity market, where payments to keep power plants available to meet peak demand have surged from $2.2 billion to over $16 billion in recent auction cycles, according to PJM Interconnection’s auction results. 

Who Is PJM and Why Does It Matter to Your Wallet?

PJM Interconnection (PJM) is the regional grid operator serving 67 million people across thirteen states and the District of Columbia, including all Pennsylvanians. Although PJM is not widely known, its decisions directly affect monthly electric bills.

PJM runs auctions to ensure enough power plants are available to meet future demand. Utilities must purchase this capacity to guarantee reliability, and when PJM’s auction prices spike, those costs flow directly to consumers. In one recent auction cycle, capacity prices rose more than 800 percent.

A recent “State of the Market” report from PJM’s independent market monitor found that overall wholesale electricity costs in the region jumped 56 percent in 2025 alone, driven largely by surging demand from data centers and delays in bringing new power plants online.

These cost increases aren’t just an energy story. Electricity costs are embedded in the price of everything — the groceries on your shelf, the goods manufactured in our factories, the services your local businesses provide. When electricity gets more expensive, everything else gets more expensive, too. That’s why rolling back these increases isn’t just an energy policy priority, but also an economic imperative.

Pennsylvania’s own Independent Fiscal Office recently illustrated that the state’s average residential electricity price is even higher than Virginia’s. Other data shows that the magnitude of the price increase over the last five years was greater in the Keystone State than in Virginia, too, even while data center development there has sprung up just as rapidly. Why? Because Virginia allows for vertically integrated utilities — I’ll get to that later.

Data centers may be contributing to the problem, but they are not the root cause. To understand what’s really happening, you need to know about PJM.

Many Pennsylvanians may not realize that electric utilities in the state do not profit from high wholesale prices. When PJM costs increase, customer bills rise proportionally, as utilities invest funds in grid expansion without a profit markup. In contrast, independent power producers, whose power utilities must purchase at auction, do earn profits from these transactions.

Some advocacy groups are now pushing a different narrative. Organizations such as the American Economic Liberties Project argue that large utilities represent a form of “corporate concentration” that policymakers should rein in.

But this argument misunderstands how electricity markets work in states like Pennsylvania. Because of restructuring, utilities no longer control most power generation and often have little influence over wholesale electricity prices. Instead, they must purchase electricity from competitive markets like PJM, where independent power producers benefit when prices surge. Weakening utilities further will not lower costs for consumers; it will make it harder to build the reliable generation needed to keep prices stable.

For most of the 20th century, electric utilities were vertically integrated — responsible for producing, transmitting, and delivering electricity. They had both the obligation to serve customers and the authority to build the generation needed to do it.

In recent decades, Pennsylvania and much of the PJM region restructured electricity markets by separating power production from regulated utilities. The intent was to lower prices and encourage investment through competition. However, power plant retirements have outpaced new construction, wholesale prices have increased, and Pennsylvania’s utilities now only manage transmission infrastructure. As a result, they have limited control over ensuring adequate and affordable power generation for customers.

As electricity demand accelerates — driven in part by artificial intelligence and data centers — that disjointed structure becomes a critical liability.

The Fix: More Generation, Smarter Structure

When demand increases, and supply remains unchanged, prices rise. This basic law of economics applies to both goods and electricity. Pennsylvania needs additional electric generation and supportive policies to achieve it. Revisiting outdated laws that prevent utilities from owning their own power plants is essential. In states with vertically integrated utilities, power production costs are often more stable because their plants provide a hedge against market volatility. These utilities are not forced to purchase power at peak prices and can plan long-term investments, coordinate generation and transmission, and build new capacity proactively.

Pennsylvania lawmakers on both sides of the aisle have already identified increasing energy production as a top priority. That bipartisan instinct is exactly right. The stakes are already high for Pennsylvania’s role in the future economy and household budgets. Getting our electric system right is non-negotiable because it affects everything else on which Pennsylvanians spend their hard-earned money.

Joy Ditto is CEO of Joy Ditto Consulting and former CEO of the American Public Power Association and the Utilities Technology Council.