The New Jersey Board of Public Utilities has released a state mandated study concluding that the wholesale capacity market run by regional grid operator PJM Interconnection can no longer reliably deliver power at the lowest possible cost, and is calling for a specific set of reforms to fix it. The report, delivered to Governor Mikie Sherrill and the Legislature, lands as New Jersey electricity bills climbed roughly 20 percent over the past year, an increase the state attributes largely to rising costs inside PJM’s capacity market specifically.

A Market Even Regulators Say Is Broken

PJM Interconnection coordinates wholesale electricity flow and manages grid reliability across 13 states and the District of Columbia, including all of New Jersey. Within that system, PJM’s capacity market, formally known as the Reliability Pricing Model, is meant to guarantee enough power generation exists to meet future demand by paying generators in advance to keep capacity available. Capacity charges make up roughly 15 to 20 percent of a typical New Jersey customer’s electric bill, a real but relatively modest slice of the total, yet it stands out for a specific reason, it is the single largest cost component on that bill that state regulators like the NJBPU have no direct authority to set, regulate, or change themselves.

That price volatility has been dramatic in recent years. PJM’s capacity auction covering the 2025 to 2026 delivery period cleared at nearly ten times the price of the auction before it, and the following year’s auction hit the maximum price ceiling regulators had put in place, a result state officials have pointed to directly as evidence the current market design is no longer functioning as intended. The Legislature responded by directing NJBPU staff, in a measure passed in August 2025, to investigate whether the capacity market was still doing its job and report back within a year. Board staff spent that year examining PJM’s own auction data, tracking surging regional demand forecasts, and weighing reform proposals already circulating among PJM, other states, and federal regulators, work that culminated in this newly released report.

Four Fixes the State Wants to See

The report lays out a specific, four part reform framework the NJBPU intends to pursue both through PJM’s own stakeholder process and directly with the Federal Energy Regulatory Commission.

Of those four items, the data center provision has already moved from recommendation into active state law, with New Jersey requiring large new electricity users to either bring their own generation online or accept a lower service priority tier, a rule the NJBPU has already begun implementing. The stated goal is straightforward, ensuring that existing residential and small business ratepayers are not left absorbing infrastructure costs created specifically by new, large scale demand they had no part in generating.

A Bigger Fight Than Just This One Report

It is worth noting that capacity charges, while significant, represent only one piece of a considerably larger picture. Broader state analysis has found that at least 75 percent of a typical New Jersey electric bill is actually determined outside direct state control entirely, shaped instead by PJM’s wholesale markets and federal policy, with the remaining share tied to the distribution costs utilities and the NJBPU can influence more directly. That context has fueled a genuine debate among ratepayer advocates and energy policy critics over whether reforms focused specifically on PJM governance go far enough, or whether the state should be pursuing more aggressive changes to the roughly quarter of the bill it can actually control directly, including how utilities are compensated and how new transmission projects get approved and paid for.

The NJBPU has signaled that this report is not intended as a final word on the subject. Over the coming year, the agency said it will continue developing reforms covering how businesses and utilities interact with PJM’s markets, including through new data center specific rate structures, a separate Virtual Power Plant proceeding, and broader utility business model reform. The board also plans to use newly granted statutory authority to regulate local transmission projects directly, an area officials say has driven up costs for ratepayers in recent years while frequently failing to actually bring lower cost renewable power into New Jersey from elsewhere across PJM’s footprint. Whether these combined efforts translate into a meaningfully lower electric bill for New Jersey households remains to be seen, but the state has now put a detailed, specific reform agenda on the table, one that will play out over the coming months across PJM’s own governance process and in front of federal regulators in Washington.