AI’s Power Bill Is Landing In A Market Most Investors Ignore

PJM Interconnection, which manages electricity for 13 U.S. states and Washington, D.C., saw capacity auction prices for power plants jump from $28.92 per megawatt in 2021 to $269.92 in 2023—a near ninefold increase. The surge is largely attributed to AI data centers, which now dominate demand forecasts. PJM’s market monitor links the price spike to these facilities, with customers locked into high rates for years regardless of whether the data centers materialize. The latest auctions hit record highs, with 2026/2027 clearing at $329.17 and 2027/2028 at $333.44, both capped by a deal with Pennsylvania Governor Josh Shapiro. Some regions, like Baltimore and Virginia, saw even higher prices—$466.35 and $444.26, respectively. The December auction fell short of PJM’s reliability target for the first time, with nearly all new demand (5,100 of 5,250 megawatts) tied to data centers. Leo Fan of Cysic described AI demand as ‘dense, around-the-clock’ and concentrated in specific regions, comparing it to ‘dropping a new heavy-industry town onto the grid.’ Monitoring Analytics initially attributed 63% of last year’s price increase to data centers, totaling $9.3 billion in passed costs. However, later reports adjusted the share to 45% of a $47.2 billion total, reflecting shifting forecasts. Utilities recover these costs through ratepayer bills, even if data centers fail to materialize. The trend highlights how AI’s energy needs are reshaping electricity markets, benefiting power companies while burdening consumers with long-term commitments based on speculative demand.