digit electric rate hikes are coming to our region

For consumers and businesses managing their finances, their monthly electricity bill is always a matter of concern. But due to new federally approved rules, double-digit rate electric rate hikes are expected in Bucks and Montgomery counties starting in 2025.

These price increases are related to a power supply auction run by the PJM Interconnection, which maintains the electricity grid for 13 states and the District of Columbia. PJM used bidding guidelines, approved by the Federal Energy Regulatory Commission (FERC), for a July 2024 auction for "installed capacity," which is the power PJM needs to buy in advance to ensure it can maintain the grid during possible summer and winter usage events.

The July 2024 PJM auction for installed capacity came in at $14.7 billion, or 568% higher than its prior auction. What that means for readers is that your electric bill could go up between 10% and 20% annually next year, and in following years.

To be sure, you are not alone. The installed capacity increases will be passed on directly to the 65 million customers in the PJM grid system, or 20% of all Americans. PECO expects a 10% increase in monthly bills in 2025 because of installed capacity. PPL says its average consumer bills will go up by $10 to $15 monthly next year to pay PJM fees. First Energy, which serves six million customers, will raise customer bills between 11% to 19% for the same reason. Other observers put the consumer price hikes above 20% for some PJM customers.

PJM pointed to several factors for the fee increases, including generator retirements, high usage from artificial intelligence and data-mining centers, and FERC-approved rules that exclude green-energy companies from helping the grid in emergencies.

In Perkasie Borough, we have discussed installed capacity at several public meetings. Perkasie is one of 35 local governments in the state that own their electricity distribution system. We also expect price hikes for our residents in line with the PECO and PPL hikes once our budget process concludes in December. Our fellow public power neighbors in Quakertown, Lansdale, and Hatfield boroughs face similar challenges.

One question we have raised at public meetings is how this situation has come to be. This is the same question asked by the Independent Market Monitor (IMM), a group legally assigned as a watchdog over PJM. During hearings in October 2023, PJM presented expert testimony that the worst-case scenario was a $5.1 billion annual installed capacity increase, starting in June 2025.

Instead, the price tag was $14.7 billion, which came as a great surprise to the Market Monitor and other experts. The Market Monitor and the state utility commissions of 10 states, including Pennsylvania, have filed complaints at the FERC about the July 2024 auction, which the Market Monitor believes added an unneeded $7.6 billion in costs to consumers.

Perkasie Borough also has inquired in Washington, D.C. about these price hikes. Rep. Brian Fitzpatrick filed our comments with the FERC in late October and expressed our shared questions about costs impacting families and small businesses. At the same time, Pennsylvania Gov. Josh Shapiro and four other governors raised the same concerns expressed by Perkasie Borough and Rep. Fitzpatrick with PJM.

We hope state and federal officials remember that for all consumers, especially people and families on fixed incomes, the capacity charges are a real-life budget issue. One recent Bank of America study found that 50% of Americans consider themselves as living from paycheck to paycheck. If PJM's goal is to maintain electricity during severe events, it is counterproductive to price electricity so high that many people can't afford to turn on their heat during a winter storm or air conditioning during a heat wave.

For these reasons, the federal government needs to take an active role in finding a path forward to lessening the burden on everyday Americans. Perkasie Borough and its representatives are ready to provide any evidence or help to make that happen.

Scott Bomboy serves on Perkasie Borough council, and he chairs its Financial Committee.