Electric bills are going up across the US, including Perkasie. Here’s why.
The Borough of Perkasie is one of thirty-five municipalities in Pennsylvania that provide the electric utility to their community. The difference between the Investor-Owned Utilities (IOU’s) such as PPL or PECO, And the Borough’s electric utility is the revenue generated by the IOU’s goes to their stockholders, however the revenue from the Borough’s electric utility does directly to funding the Borough’s services and operational costs. The result is a lower local property tax rate in Perkasie.
Electric rates consist of three main components: electric generation, transmission, and capacity. Transmission costs pay for the electricity being transmitted across the electric grid from the generation source to Perkasie. Capacity is the total amount of electricity generation available for consumption at any given time. To ensure that there is sufficient generation available to supply consumers, electric grid operators created capacity markets to incentivize electric generators to produce enough power.
PJM Interconnection is a regional transmission organization (RTO) in the United States. Their main job is to ensure that electricity flows reliably across a large power grid that serves more than 65 million people in 13 states and Washington, D.C. PJM operates the largest competitive wholesale electricity market in the world and runs regular capacity auctions to decide how much energy will be available in the future and at what cost.
PJM’s most recent capacity auction hit record highs, meaning that electricity prices will go up for everyone in its 13-state area and Washington, D.C. The previous capacity auction cleared at about $2.2 billion. The most recent auction, held in July of 2024, cleared at about $14.7 billion, which is an increase of about 568%! Here’s why:
- More Demand, Less Supply: More people need electricity, and new types of industry – mainly AI and data centers – have created a massive demand, but older power plants are shutting down and regulations and permitting mean that new plants are slow to come on line.
- New Rules for Reliability: PJM changed its rules to focus on making sure power is available during emergencies, like heat waves or storms. This makes electricity capacity more expensive because companies need to plan for extra capacity for those tough times.
- Local Shortages: Some areas don’t have enough energy resources nearby, which made prices even higher in those places. Even though Pennsylvania is a net exporter of electricity to the grid, customers here will pay more next year because the capacity is shared across the whole region.
These changes all mean that electricity bills are increasing, but they are also meant to encourage companies to build more power generation resources and improve the system, which is important for keeping the electricity reliable.
What it means for Perkasie Borough:
The increase in the cost of capacity means that all utilities across the PJM Regional Transmission Organization coverage area have to, in turn, increase the price of electricity for their customers. The Borough is currently exploring additional ways to minimize the impact of increasing capacity costs. However, your electric utility rates will be increasing in 2025 and will possibly continue to increase through 2027. You will notice a new line item on your bill beginning in February with the pass through cost from PJM for installed capacity charges.
Members of Perkasie Borough Council are working on your behalf to lobby state and federal officials, and are working with Pennsylvania’s municipal owned utilities and industry organizations and watchdogs in an attempt to mitigate against another price hike in a future capacity auction. In November, the Governors of New Jersey, Pennsylvania, Illinois, Maryland, and Delaware issued a joint letter to PJM demanding urgent action to address the increasing electricity costs by adopting reforms to its market structure and interconnection process. Perkasie Borough Council Member Scott Bomboy wrote an editorial piece that can also be found here with more details. At the time of writing, PJM announced plans to postpone the next capacity auction for 6 months so they can discuss market reforms with the federal government.
The issues are complex, and the situation is continuing to evolve. Perkasie Borough Electric Company will continue to provide the outstanding levels of service and reliability that our community has come to depend on. Perkasie Borough Council will continue to advocate on your behalf, and share updates on our website. To learn more, visit www.papublicpower.org/ratehikes.
