Zhitong Finance learned that due to shrinking energy supply and rising demand for America's largest power grid, more than 65 million Americans will face the prospect of a sharp rise in electricity prices next year. In the new fiscal year beginning in June, the US electricity auction price is likely to jump; before that, the electricity auction in 2023 achieved a ten-year low of $28.92 per megawatt-day. The latest auction results are expected to be announced Tuesday afternoon; analysts predict electricity prices could be two to four times higher this time. The electricity auction was held by PJM Interconnection, the largest grid operator in the US, and is one of the most watched events in the US electricity market.

As Virginia increases electricity demand to meet the electricity needs of its artificial intelligence and data centers, the US grid is struggling to control overcapacity. The shutdown of coal-fired and natural gas power plants will also reduce the grid's power generation capacity by about 4 gigawatts — enough to power around 3.2 million homes.

The electricity auction was held by PJM Interconnection LLC, the largest grid operator in the US to ensure adequate supply. The prices generated by these auctions are paid to the company through household and business utility bills. The company's mission is to coordinate power plants and utilities, and manage the grid extending from New Jersey to Illinois.

The PJM auction is one of the most watched events in the US electricity market. The results usually signal to the plant owner and project developer separately whether to continue to operate the old power plant or build a new generator. It also provides plant owners with an important source of revenue to maintain and prepare to service under tight conditions.

According to more than a dozen PJM market observers (from analysts to financiers) surveyed by the agency, compared with last year's auction, the price of the entire power grid is rising. Expectations varied widely, from $35/MW-day to $125/MW-day, but most bids were in the middle.

PJM has also implemented new regulations to limit the supply they get from factories that have experienced power outages in extreme weather. Moody's Ratings said the total power generation of the newest and most efficient gas generator sets could drop by 20%, while the supply of older gas generators could be reduced by nearly one-third.

Among them, Baltimore is likely to feel the most pressure on prices — the city gets its electricity from Brandon Shores' coal-fired power plant, which is on the verge of shutting down. This could increase the cost of generation by more than five times for other generators in the region, to $400/MW.

Maryland Congressman Lorig Charkoudian said, “I'm concerned about rising costs. We count on PJM's reliability and cost reduction.” For years, he has warned PJM that Baltimore is about to experience supply constraints.

PJM spokesman Susan Buehler said in an email statement on Monday that although PJM said it was impossible to comment on expected prices until the market closed, Brandon Shores' exit was unexpected and was the result of a private agreement. “PJM has been voicing concerns about the mismatch between supply and demand for quite some time,” Buehler said.