New Jersey Took On the PJM Capacity Market: What the NJBPU Investigation Changes for Your Facility (and What It Doesn't)
New Jersey is fighting the PJM capacity market on your behalf. That fight will not lower your facility's electric bill this winter.
In August 2026, the New Jersey Board of Public Utilities (NJBPU) concluded that PJM's capacity market can no longer deliver reliable power at the lowest possible cost. Its report identifies the data center customer class as the primary driver of current resource-adequacy risk and recommends that reforms allocate the associated costs and risks to that class.
That is an important policy position. It is not an immediate rate reduction.
New Jersey industrial, chemical, manufacturing, and logistics facilities still operate inside the current PJM structure, and capacity charges continue to flow through electric bills. The 2026/2027 delivery year now on bills (June 1, 2026 through May 31, 2027) cleared at $329.17 per megawatt-day, compared with $28.92 per megawatt-day for 2024/2025.
The two auctions held since then also cleared at the price cap: $333.44 per megawatt-day for 2027/2028 and $325.00 per megawatt-day for 2028/2029. In practical terms, elevated capacity pricing is already set through May 2029.
View the chart data
| Delivery year | Period | Clearing price ($/MW-day) | Status |
|---|---|---|---|
| 2024/2025 | June 2024 to May 2025 | $28.92 | Past |
| 2025/2026 | June 2025 to May 2026 | $269.92 | Past |
| 2026/2027 | June 2026 to May 2027 | $329.17 | On bills now; cleared at the price cap |
| 2027/2028 | June 2027 to May 2028 | $333.44 | Already set; cleared at the price cap |
| 2028/2029 | June 2028 to May 2029 | $325.00 | Already set; cleared at the price cap |
The practical question is not whether New Jersey is challenging the market. It is:
What can your facility verify, control, and hedge while the market challenge continues?
What the NJBPU investigation actually said
The NJBPU's report, An Investigation of PJM's Capacity Market, was required by the New Jersey Legislature. It evaluates whether PJM's Reliability Pricing Model is meeting its intended objectives:
- Maintaining adequate electricity supply.
- Supporting grid reliability.
- Doing so at the lowest reasonable cost for customers.
The report's conclusion is direct. Current demand and supply conditions prevent PJM's existing market design from maintaining resource adequacy at least cost, and significant reforms to capacity procurement are needed.
The central demand-side issue is data center growth. PJM forecasts summer peak demand rising from about 156 GW in 2026 to 183 GW by 2030. New generation, meanwhile, faces long interconnection queues, permitting delays, equipment shortages, and higher construction costs.
The result is a capacity shortfall, not just high prices. The 2027/2028 and 2028/2029 auctions each procured capacity 5.6 percentage points short of PJM's 20% target reserve margin.
The NJBPU's recommendations follow a cost-causation principle:
- Data centers and similar large loads should bring their own new generation to the grid.
- Large loads that do not should accept lower-priority service.
- Reforms should allocate the costs and risks of serving that load to the customers creating it, rather than to existing customers.
What the report changes
It changes the policy direction.
New Jersey is signaling that data centers and other large new loads should not receive the same reliability service without bearing the incremental cost of that service. The report also recommends that PJM consider longer-term price signals, a seasonal (sub-annual) capacity market in place of a single annual auction, and a more current, or "prompt," auction structure.
The state has already acted on part of this. In July 2026, Governor Sherrill signed P.L.2026, c.32, which directs the NJBPU to set tariff standards for data centers of 50 MW or more. Utilities are to apply those tariffs beginning one year after enactment.
These reforms could matter materially over time.
What the report does not change
- It does not eliminate the capacity charges already embedded in current electric bills.
- It does not cancel the 2026/2027, 2027/2028, or 2028/2029 auction results.
- It does not remove a New Jersey facility from PJM's capacity obligations.
- It does not make capacity costs disappear simply because New Jersey is challenging how those costs are allocated. The new data center tariff applies to data centers, not to existing manufacturing or logistics load.
For existing industrial customers, the report changes how future costs may be assigned and governed. It does not change whether current costs appear on the invoice.
How New Jersey industrial customers actually get charged
New Jersey facilities that receive default service under the commercial and industrial structure may be subject to BGS-CIEP, the Commercial and Industrial Energy Pricing class. BGS-CIEP includes a generation capacity obligation charge tied to PJM auction results. The charge is applied daily to a customer's annual peak load share.
That peak load share, often called the peak load contribution or PLC, is not set by your facility's own highest demand of the year. It is set by your facility's load during the five highest PJM system peak hours of the prior summer (June through September). The utility scales those readings and applies the result from June 1 through May 31 of the following year.
View the chart data
| Summer peak hours | Obligation billed | Clearing price ($/MW-day) |
|---|---|---|
| Summer 2025 | June 2026 to May 2027 | $329.17 |
| Summer 2026 | June 2027 to May 2028 | $333.44 |
| Summer 2027 | June 2028 to May 2029 | $325.00 |
That has an important operational consequence.
A facility's capacity cost is not determined only by annual consumption.
It is set by how much load the facility carries during a handful of regional peak hours each summer.
A site may operate efficiently for most of the year and still create a large capacity exposure by running at full load on the afternoons when the PJM system peaks. Conversely, a site whose own peak falls on a different day may carry a smaller obligation than its demand charges suggest.
The relevant variables can include:
- The facility's load during the PJM summer peak hours.
- The timing and magnitude of the facility's own demand peaks.
- Rate classification.
- The utility's capacity obligation calculation and scaling factors.
- Interval meter data.
- Demand response or peak-shaving participation.
- Contract language governing capacity pass-throughs.
Capacity costs cannot be avoided by switching suppliers. Every supplier must buy capacity for your load. The charge is either itemized as a pass-through or embedded in a fixed price, and a fixed-price contract fixes its cost rather than removing it.
That is why a facility-level review matters. A regional PJM price is a market signal. It is not a complete explanation of your facility's cost.
Why interval-level review is necessary
A monthly bill may show the amount charged. It usually does not explain whether the underlying billing determinants are correct.
An interval-level review can help answer:
- What was the facility's load during each of the PJM summer peak hours that set its capacity obligation?
- Were those loads operationally necessary at that hour?
- Did a startup, maintenance event, weather condition, or control failure create an avoidable spike on a peak day?
- Was the peak load share assigned to the correct account and meter?
- Does the capacity calculation align with the applicable tariff and contract?
- Are demand ratchets or minimum charges compounding the exposure?
Capacity is one of the few major components of a New Jersey industrial electric bill that a facility may materially influence through operations, load management, and verified billing data. Timing matters: summer 2026 peaks have already set the obligation billed from June 2027, while load during the summer 2027 peak hours will set the obligation for the 2028/2029 delivery year.
Gas and electric are not moving together
New Jersey's energy exposure should not be evaluated as one blended number.
Electric customers are facing the consequences of the PJM capacity shock. Capacity costs now represent a much larger share of wholesale electricity costs than before the 2025/2026 delivery year, and those costs flow directly into commercial and industrial supply charges.
Natural gas operates under a separate regulatory and market structure, and this winter it is moving differently. In September 2026, the NJBPU approved provisional Basic Gas Supply Service (BGSS) rates effective October 1, 2026. New Jersey Natural Gas, South Jersey Gas, and Elizabethtown Gas all lowered their periodic BGSS rates, which apply to smaller sales customers.
The gas picture is not uniformly downward, however. New Jersey Natural Gas has a pending base rate case tied to about $950 million in system investments, timed to take effect late in the 2026–2027 winter. Gas utilities may also self-implement provisional BGSS increases of up to 5% during the year with notice to the NJBPU.
Many larger industrial gas users buy their commodity from a third-party supplier and take transportation service only. For them, the supply contract and the utility's delivery rates matter more than BGSS changes.
A facility can therefore experience:
- Higher electric capacity charges.
- Lower gas commodity costs on default supply, alongside potentially higher gas delivery rates.
- Different commodity exposure under separate supply contracts.
- Utility-specific riders and assessments.
- Different renewal and hedging requirements for each commodity.
Reviewing only total monthly utility spend hides these distinctions. A proper commercial energy auditing process separates electric supply, electric delivery, capacity, demand, natural gas commodity, distribution, riders, and assessments.
A utility audit should be the first step
It is nearly impossible to fix what you do not understand.
Before changing suppliers, adding equipment, or making a long-term energy procurement decision, a New Jersey facility should complete a utility audit.
Discovery Energy's utility bill audit process examines historical electricity and natural gas bills, rate classifications, tariff application, meter configuration, demand charges, incentives, and regulatory billing requirements.
For a New Jersey industrial account, the review should include:
Rate classification verification
Confirm that each account is billed under the correct commercial or industrial rate schedule. Changes in facility operations, equipment, production volume, or service configuration can make a previously appropriate classification incorrect.
Capacity pass-through review
Determine whether the electricity contract passes PJM capacity costs through to the customer or fixes them in the contract price. Do not assume a fixed energy rate is a fixed all-in rate.
BGS-CIEP peak-share validation
Review the peak load share assigned to each account and the daily application of the generation capacity obligation charge. Confirm that the account's billing determinants match the facility's actual interval data during the PJM summer peak hours.
Interval and peak-day analysis
Identify the load the facility carried during the hours that set its capacity obligation, as well as its own demand peaks. Then separate unavoidable production demand from avoidable operational spikes.
Demand ratchets and minimums
Check whether the tariff applies a demand ratchet, minimum demand, or other provision that preserves a prior peak even after current usage declines.
Meter multipliers and account configuration
Verify meter multipliers, account numbers, service addresses, billing periods, and meter relationships. A configuration error can compound across every bill.
Utility billing errors
Review for duplicate charges, incorrect demand calculations, estimated readings, misapplied riders, incorrect rate changes, and other utility billing errors.
The goal is not merely to find a refund. It is to establish a verified baseline for future decisions.
Practical actions for New Jersey facilities
Audit before you procure
Complete the utility audit first. A supplier cannot correct a utility's rate-class error, demand ratchet, meter multiplier, or capacity billing determinant simply by offering a new commodity price.
Manage load during summer peak hours
Use interval data to see what the facility drew during last summer's PJM peak hours. Then determine whether production schedules, HVAC, compressed air, refrigeration, or other major loads can be shifted on likely peak afternoons next summer.
Peak management must be tied to operational economics. A reduction that disrupts production may cost more than the capacity savings it creates.
Use clear Buy, Wait, or Hedge guidance
Do not renew based only on contract expiration.
Discovery's energy procurement strategy uses competitive supplier bidding, market data, forward-market analysis, and timing recommendations. The correct decision depends on risk tolerance:
- Buy when budget certainty is more valuable than additional market flexibility.
- Wait when the market outlook and contract structure justify delaying commitment.
- Hedge when partial protection provides a better balance between price certainty and market exposure.
Capacity must be evaluated separately from energy commodity pricing.
Benchmark comparable New Jersey facilities
Compare facilities by demand profile, rate class, production intensity, cost per unit of output, and capacity exposure. A simple cost-per-kilowatt-hour comparison can be misleading when facilities have different load shapes and demand determinants.
Track the full PJM footprint
New Jersey operators with facilities in Pennsylvania, Ohio, Illinois, Indiana, Maryland, or Virginia should track regional changes.
Maryland's Utility RELIEF Act, enacted in 2026, lowered the threshold for mandatory large-load rate schedules to 25 MW with a 60% load factor. Check whether any Maryland site approaches that level. Dominion Energy Virginia's GS-5 class for customers of 25 MW or more takes effect January 1, 2027.
These developments indicate that PJM states are moving toward more explicit treatment of large-load cost responsibility. A multi-site organization needs one regional strategy, not isolated state-by-state reactions.
Build a single integrated view
TaraBase consolidates bills, usage, contracts, savings, and ESG metrics in one platform. Discovery's reporting and TaraBase service gives finance, facilities, and operations teams a shared view of:
- Capacity and demand exposure.
- Contract terms and expiration dates.
- Site-level usage trends.
- Verified savings against an agreed baseline.
- Billing anomalies.
- Multi-state cost comparisons.
When billing data, interval usage, contract terms, audit findings, and procurement decisions remain in separate spreadsheets, the organization loses the ability to connect cause and cost.
Sources
- NJBPU, An Investigation of PJM's Capacity Market (August 2026)
- NJBPU, New Jersey Releases New Report Outlining Strategic PJM Market Reforms (August 2026)
- PJM, 2028/2029 Base Residual Auction results (July 2026)
- PSE&G, Capacity and transmission obligation calculation (June 2026)
- NJBPU, Order on NJNG provisional BGSS rates (September 2026)
- New Jersey Resources, NJNG filings announcement (June 2026)
- Utility Dive, New Jersey data center tariff bill (July 2026)
- Gordon Feinblatt, The RELIEF Act of 2026
- Cardinal News, Virginia SCC approves Dominion GS-5 class (November 2025)