If you live in one of these 13 states, your power prices are set to surge. Here are 3 actions to take now

If you’re like most people, you haven’t spent much time thinking about how the electricity markets work. But it’s time to pay attention. After decades of flat electricity load growth, we are entering a supercycle of increasing demand, setting the stage for rapidly increasing electricity prices in household utility bills.

As a forerunner of what’s to come nationwide, the price of peak electricity demand skyrocketed in the country’s largest electricity market, known as PJM Interconnection, which serves 65 million people across 13 states and Washington, D.C.

What’s happening in the North Atlantic power grid?

In a recent PJM auction aimed at securing power in 2025-2026 during periods of high demand and extreme weather, so-called “capacity costs” surged by over 800%. Meeting peak demand in PJM next year will cost a “staggering” $14.7 billion bill for consumers, a price tag that has five governors from the region calling for rule changes to ease this burden on customers.

If you live in one of the states PJM serves, you could see your bill rise by about $20 more per month starting in mid-2025—an extra $240 per year. And, importantly, while this specific rise in cost will impact 13 states, it is representative of what we are likely to see everywhere.

For families already squeezed by inflation, this is bad news. And this isn’t a onetime bump. It’s a shift that will impact electricity prices for years to come. The next PJM capacity auction is scheduled for 2025, which will set the price of peak electricity for 2026-2027, and experts think the electricity prices could increase even further, causing increases of as much as $40-50 per month for a typical household.

A strained grid meets tech-driven demand

Several major factors are fueling this sharp rise in electricity prices. First, the demand for electricity is growing rapidly, driven by data centers powering AI, cloud services, and the digital economy. Data centers alone could account for 44% of U.S. electricity load growth through 2028.

At the same time, extreme weather events—intensified by climate change—are putting additional strain on power grids. During heat waves, AC usage spikes, pushing the grid to its limits. As these weather events become more frequent and extreme, the grid is under greater pressure.

On the supply side, new power plants and grid infrastructure aren’t keeping up with the surge in demand. It takes years to build a power plant and transmission infrastructure, along with the years it takes to get approvals from regulators and grid operators.

The transition to renewable energy also adds complexity. Coal and natural gas plants are becoming expensive to maintain and operate, being replaced with low-cost sources like wind and solar. However, wind and solar are variable power sources, meaning they don’t always produce electricity when demand is highest, leading to downward pressure on prices most hours of the year, but higher volatility in prices when grid demand spikes.

Big energy users shift costs to consumers

A critical and overlooked issue here is how electricity costs are distributed. Capacity costs—designed to ensure enough power during peak periods—are allocated based on how much you contribute to peak demand moments on the grid. Large, sophisticated energy users, like manufacturing facilities and data centers, can minimize capacity charges by intelligently cutting their energy usage during a few peak hours each year, saving millions.

Meanwhile, smaller users—households, and small businesses—don’t have the tools or pricing mechanisms to manage usage or benefit from doing so. We’re often stuck with fixed rates that bundle in and effectively socialize capacity costs, regardless of when or how we use electricity. Even in deregulated markets, consumers pay rates that include these bundled charges.

This setup means those who aren’t actively managing their usage and rates—i.e. households and small businesses—are fully exposed to increasing capacity costs. And one could even argue that since consumers are effectively unknowingly and very poorly participating in an increasingly expensive and dynamic energy market, up against large sophisticated energy users, we end up paying a disproportionate amount of the total system costs. This feels unfair. And it is.

New solutions

There’s a clear opportunity for new solutions. Utilities and retail electricity providers could offer customized pricing based on actual household usage during peak times, to accurately allocate the increasing cost of meeting peak demand. This would provide a price signal to consumers to reduce their energy usage when demand is highest, enabling us to mitigate increasing costs, just like larger more sophisticated energy users.

However, a price signal isn’t enough. Consumers need help navigating an increasingly complex energy ecosystem. Smart technologies—like electric vehicles, smart thermostats, and other connected energy devices—are already capable of adjusting usage in real-time.

But most consumers aren’t benefiting from these tools because even though they’re called “smart” devices, most don’t actually know about or respond to real-time price signals. In this new energy landscape, consumers need intuitive, automated solutions to mitigate rising costs and support a more efficient, resilient electric grid in an era of growing demand.

In the meantime, for those in the 13 states under PJM’s jurisdiction, higher bills are absolutely coming next summer. If you’re in one of these areas, here’s what you can do now:

Look for a lower fixed rate: If you’re in a deregulated market, securing a fixed-rate plan can stabilize your bill and protect you from price spikes. However, it’s crucial to compare offers and read the fine print. Some rates could rise over time or at the end of your contract term. Be sure that the rate you’re paying is lower than the utility rate, and will not automatically change when your contract term is up

Explore home energy products and incentives: If you are not in a deregulated market, you can always look into solutions like rooftop solar, smart thermostats, and efficiency upgrades that can reduce bills significantly. There is a wide array of federal, state, and local incentives to lower the upfront cost. Organizations like Rewiring America also offer valuable resources to help homeowners navigate the wide array of federal, state, and local incentives, making it easier to lower upfront costs and make energy-saving upgrades.

Stay informed: As energy markets become more volatile, tracking your consumption and staying updated on rate changes can help you optimize your energy usage and avoid surprises.

The digital economy and climate change are reshaping the grid, and price volatility is likely here to stay. We need to develop products and services that empower consumers to manage energy usage and costs, putting them on a level playing field with the tech companies driving up those costs while mitigating their exposure.

In the meantime, everyday billpayers aren’t powerless. Review your rate options, assess whether home energy products might help you save, and stay informed. Small actions can help mitigate the impact of rising power costs.