New Jersey is a microcosm of how and why electricity prices are rising faster than inflation. The system is expensive to maintain and operate. It exists within an electricity market that has seen some of the fastest data center growth in the country. And it has struggled to bring on new supply quickly.
A lot of this comes down to the electricity market the state is in — PJM Interconnection, the country’s largest grid operator. Over the past two years, the cost of guaranteeing that the grid will be able to meet peak demand has skyrocketed to $16.1 billion, from just $2.2 billion in 2023.
These prices are set at auction, in which generators tell the market how much they’d need to be paid to be around in times when the grid is most in need. “PJM’s capacity market — its primary means of incenting investment in new power plants — has not worked as designed since 2018,”, Silverman testified before the New Jersey legislature in March. (The auctions are supposed to be held annually, but were delayed several times toward the end of the last decade as PJM and the Federal Energy Regulatory Commission reviewed proposed rule changes.)
In February, the New Jersey Board of Public Utilities said that its own auction to procure services from PJM, which follows the prices set in the PJM auction, would result in roughly 20% increases in retail electricity bills. “PJM’s recent capacity auction results are the main driver of these increases,” Christine Guhl-Sadovy, the board’s president said in a statement. In practical terms, that’s about a $20 increase per residential electricity bill on average, according to the non-profit urban planning group the Regional Plan Association.
When Silverman analyzed the components of New Jersey’s electricity price increases, he identified an 8.5% increase in energy prices paid through PJM from 2023 to 2024, a five-fold increase in capacity prices, and transmission costs that had doubled over the previous decade, including a 9% increase in just the previous year.
As for what’s behind those skyrocketing capacity price increases, I’ll give you one guess.
“Data center load growth is the primary reason for recent and expected capacity market conditions, including total forecast load growth, the tight supply and demand balance, and high prices,” PJM’s independent market monitor said in a report on the 2024 capacity auction, attributing over $9 billion of the increase to the demands on the grid due to data centers.
While much of that data center demand has been in other PJM states like Virginia, Ohio and Pennsylvania, within the service territory for New Jersey’s largest utility, Public Service Electric & Gas, “interconnection inquiries from data centers and other large customers have increased dramatically, from 400 megawatts a year ago to 4,700 megawatts today,” PJM official Jason Stanek said in testimony before the New Jersey State Senate in March. He also referred to “a shrinking supply of energy and capacity,” which was a polite way of saying that PJM has failed to get new resources through its interconnection queue at a pace that matches planned retirements of older, fossil fuel-fired resources. That, “combined with increasing demand, will result in upward pressure on wholesale and retail prices,” Stanek said.
For years, PJM’s auctions, when they happened, were arguably delivering prices that were too low, leaving the market short of capacity as data center construction and interconnection requests boomed, leading prices to shoot up dramatically, shouldering retail ratepayers with rising bills but not quickly resolving the system’s potential reliability issues.
Still, New Jersey is one of 13 states in PJM, but it has seen some of the sharpest electricity increases among that group. In neighboring Pennsylvania, for instance, electricity prices are about a fifth lower and have only risen around 12%.
A major study of recent electricity price increases by the Lawrence Berkeley National Laboratory and the Brattle Group identified New Jersey as an especially severe case — the worst, in fact — even within the dramatic price increases throughout PJM. “New Jersey is experiencing some of the highest price increases of all PJM states in summer of 2025,” the study found.
New Jersey is also exceptionally exposed to natural gas prices. About 60% of its electricity generation comes from natural gas — although that explains more of the price increases in the years immediately following the Russian invasion of Ukraine, and less of the recent price hikes, according to the Lawrence Berkeley and Brattle Group researchers.
New Jersey is the nation’s most population-dense state, but it is also at the mercy of national markets and other states for its power, explained Kyle Mason, an associate planner at the Regional Plan Association.
“A major New Jersey factor is that it’s a net importer,” Mason told me, meaning that the state can’t always satisfy its own demands with home-grown power. “So in times of peak demand, they have to import energy from other states within PJM, and that makes them more reliant on PJM markets, particularly their capacity market,” Mason said.
New Jersey has been working to maintain and expand its existing clean energy generation, including subsidizing nuclear power plants when prices were low and investing in distributed solar power.
But it could do more. Silverman pointed to this in his testimony when he said that “a number of New Jersey-based storage projects have already survived the interconnection gauntlet and could be deployed quickly with the right incentives” — that is, they’ve been approved by PJM but have yet to be built.
New Jersey's offshore wind efforts — which would have provided large amounts of in-state clean generation — have been stymied by a combination of supply chain challenges and Donald Trump. Ciattarelli, the Republican candidate for governor, has said he would ban offshore wind, while both he and Sherrill support more nuclear power.
But even the governor of New Jersey can only do so much. “They are at the mercy of the federal government and the larger PJM body,” Mason said.
An oil rig in Utah. George Frey/Getty Images