PJM Interconnection's capacity market has cleared at its price cap for the third auction running, and for the second time in a row it has failed to buy enough. The base residual auction for the 2028/2029 delivery year, whose results PJM announced on July 14, 2026, cleared at the cap of $325/MW-day across the whole footprint and procured less capacity than PJM's reliability standard requires. The shortfall was 6,831 MW, larger than the roughly 6,500 MW gap in the previous auction.
"These auction results show that demand for electricity continues to grow faster than electricity supply," PJM's president and chief executive, David Mills, said.
The numbers
The auction secured 138,318 MW of unforced capacity (UCAP) from generation and demand response. Regions under the Fixed Resource Requirement, which procure their own capacity outside the auction, added 10,864 MW, for a total of 149,182 MW. That is 6,831 MW below what PJM needs to meet its one-event-in-ten-years reliability standard, leaving a reserve margin of 14.7% for the delivery year.
The clearing price of $325/MW-day was 2.5% lower than the $333.44/MW-day cap in the 2027/2028 auction. Multiplying cleared supply by the price gives a total of $16.4 billion. PJM noted that this does not equal the total cost to consumers, because load hedged through self-supply or bilateral contracts is not exposed to the auction price.
New supply was thin. The auction cleared just 525 MW of new generation and uprates. Total cleared capacity rose by 3,733 MW from the previous auction, mainly because existing resources were accredited at higher values, some coal units converted to gas and some units returned that had not offered last time. Natural gas capacity rose by 5,639 MW UCAP, while coal fell by 2,941 MW. In other words, almost all of the increase came from the existing fleet being counted differently, not from new plants being built.
The cleared and committed supply mix was 46% natural gas, 20% nuclear, 18% coal, 5% demand response, 4% hydro, 2% wind, 2% oil and 1% solar.
The demand side
The forecast peak load for the 2028/2029 delivery year was about 2,000 MW higher than the forecast used for the 2027/2028 auction. PJM said the auction "saw the continued trend of the addition of large data center loads to the load forecast that forms the basis of the reliability requirement."
That is the mechanism behind the shortfall. Every gigawatt of data center load added to the forecast raises the reliability requirement by more than a gigawatt, because PJM must also hold a reserve margin. Supply, constrained by a slow interconnection queue and long lead times for new plants, cannot keep up within a three-year forward auction.
PJM was explicit that the price cap does not fix the problem. "While the price cap and floor may reduce volatility, they do not solve the underlying supply-demand imbalance," it said. A shortfall "does not necessarily mean that the PJM system will be unable to serve load reliably in the delivery year; it means that PJM would have to operate with slimmer reserves and a greater level of risk."
What PJM is doing about it
PJM listed several responses in its release. It is clearing the generation interconnection queue backlog and moving to a streamlined cycle process. It is developing "Connect and Manage" frameworks that would let large new loads, such as data centers, connect to the system but operate flexibly when needed. It is running a FERC-approved, temporary Expedited Interconnection Track for up to 10 state-sponsored projects.
And on June 9, it began facilitating bilateral, long-term agreements between large load customers and generation developers, with contracts that may span 10 years or more, through a request for proposals. Those agreements sit alongside the reliability backstop procurement that PJM's Board directed staff to develop in January, after the previous auction's shortfall. The natural starting point for any backstop target is the shortfall from this auction: 6,831 MW.
How the cap got here
The cap and floor were first introduced for the 2026/2027 and 2027/2028 auctions. In January 2026, the White House National Energy Dominance Council and the governors of the PJM states signed a statement of principles asking PJM to extend the collar to the next two auctions at the current level, and to hold a backstop auction for new capacity, with 15-year price certainty, by September 2026. PJM's Board said at the time that a collar may obscure the market's clearing price and dampen signals for new supply, but it sought stakeholder views on extending it. The 2028/2029 auction ran with the cap in place.
Who pays
The auction result matters for every customer in PJM's 13 states and the District of Columbia. Capacity costs are passed through to retail bills, either directly or through supply contracts, and wholesale costs make up part of retail electricity bills.
The price cap limits the increase but also hides the true scarcity value of capacity. Without the cap, the clearing price would likely have been higher, given the size of the shortfall. That gap between the capped price and the market's view of scarcity is part of the reason PJM is turning to an out-of-market backstop, with longer contracts, to bring new plants forward.
For data center developers, the result reinforces two trends. Bringing your own capacity, through contracts with new generators or co-location at existing plants, is becoming a condition of growth in PJM rather than an option. And flexibility, the ability to cut demand at times of stress, is becoming a way to connect faster under the Connect and Manage frameworks PJM is developing.
What to watch
The next steps are the backstop filing and FERC's response, the design of Connect and Manage, and the next base residual auction, for the 2029/2030 delivery year. If that auction also clears short, PJM will have gone four years without procuring the capacity its own standard requires, and the debate over whether the capacity market can serve a system dominated by data center growth will only intensify.