Author:  Aman Azhar   Published: 5/1/2025     Inside CLimate News

PJM’s energy market and grid rules face legal challenges from the state consumer advocate, which says the grid operator unfairly charges local customers for out-of-state power needs and for bloated capacity costs

A view of the coal-fired Brandon Shores Power Plant in Baltimore

The Maryland Office of People’s Counsel, the state’s consumer watchdog, has filed two major complaints against the regional power grid operator, arguing that its market and infrastructure planning rules are systematically overcharging Maryland electricity customers to subsidize services and infrastructure benefiting other states—particularly Virginia.

In one complaint to the Federal Energy Regulatory Commission (FERC), jointly filed with the Illinois and New Jersey agencies, Maryland’s OPC targets PJM Interconnection’s 2025/2026 capacity auction in July 2024, which sent prices surging to $269.92/MW-day, a staggering increase from $28.92/MW-day in the previous auction.

According to the complaint, overall auction costs increased from $2.2 billion to $14.7 billion in a single year, producing an unjustified spike in expenses for customers. The grid serves 13 states and the District of Columbia.

“These results reflect PJM’s consistent favoring of the interests of large corporations—utilities and generators—over customer interests,” Maryland People’s Counsel David S. Lapp said in an emailed response to Inside Climate News.

“We are asking FERC to undo those unjust results and direct PJM to reset the prices for the 2024 auction by correcting the same flawed rules that FERC has already accepted the need to fix for future auctions,” he added.

If successful, the complaint could reduce the projected customer costs by over $5 billion, the OPC said.

In emailed comments, PJM spokesperson Jeffrey Shields said, “PJM has not ‘acknowledged flaws’ in its auction rules,” adding that “the rules for the 2025/2026 auction were at the time of the auction, and continue to be, just and reasonable as approved by the Federal Energy Regulatory Commission.” He argued that legally, the results cannot be retroactively changed.

Inside Climate News previously reported a separate legal filing by advocacy groups, including the Sierra Club, which estimated that Baltimore Gas and Electric (BGE) customers could see their monthly bills rise by 19 percent due to the unprecedented surge in capacity auction prices.

The OPC’s complaint argues that the spike was not due to any actual supply shortages but instead was caused by PJM’s rules, which excluded two key power plants from the pool—the Brandon Shores and Wagner facilities near Baltimore.

These plants, funded by Maryland ratepayers to stay online for reliability reasons, were not counted as available supply in the auction. As a result, the filings said Maryland consumers are now being asked to “pay twice”—once through their utility bills to keep the plants running, and again in inflated auction prices.

“Requiring Maryland’s residential customers to bear these massive costs is contrary to bedrock ratemaking principles that allocate costs based on who causes the costs and who benefits—and is unlawful,” Lapp said. Under the Federal Power Act, captive utility customers cannot be required to pay twice for the same service, Lapp said.

PJM’s own Independent Market Monitor also said the 2025/2026 capacity auction didn’t reflect real market conditions, saying it was “significantly affected by flawed market design” decisions.

The OPC complaint, citing the monitor’s findings, estimated that auction flaws, including the exclusion of power plants and other capacity market barriers, contributed to over $7.6 billion in excess charges. Prices in the BGE zone reached $466.35/MW-day, according to the complaint.

“Once again, Maryland’s residential electric customers are being asked to pay hundreds of millions for infrastructure being built to support out-of-state data centers.”

— David S. Lapp, Maryland People’s Counsel

Beyond auction failures, the OPC also separately objected to PJM’s proposed cost allocation for approximately $6 billion in new transmission infrastructure projects. These projects are primarily driven by the forecasted growth of electricity demand from data centers in Northern Virginia. Despite this growth occurring outside Maryland, the OPC said PJM’s rules would saddle Maryland ratepayers with nearly $800 million in costs.

“PJM’s rules are causing residential utility customers to subsidize the power needs of data centers serving some of the richest companies in the world,” Lapp said in his emailed response.

The complaint pointed out that PJM’s own forecasts project little or even declining demand growth for Maryland utilities. BGE’s peak load is expected to decline by 2030 relative to 2024, while Pepco’s peak load is forecast to rise by only 5 megawatts. In contrast, Northern Virginia’s data center-driven load growth alone is forecast to add more than 10 gigawatts, exceeding the total peak demand of BGE.

“Once again, Maryland’s residential electric customers are being asked to pay hundreds of millions for infrastructure being built to support out-of-state data centers,” Lapp said in a press release.

The OPC argued it was unfair to make Marylanders pay for energy projects they won’t financially benefit from—especially when those costs come from growth in other states. The agency also warned that Maryland customers will still be stuck footing the bill for expensive upgrades that may not even be needed if the expected data center demand in Virginia doesn’t come to fruition.

Both complaints assert that PJM’s practices reflect a broader structural pattern: Maryland ratepayers are being unfairly burdened, either through inflated auction prices or through disproportionate infrastructure costs.

Denying the alleged flaws in auction rules, PJM’s Shields also defended the transmission cost allocation across states as consistent with PJM’s FERC-approved tariff, saying Maryland benefits from the projects because they help maintain system reliability. “Marylanders benefit from this line because it is needed to keep their lights on, and Maryland consumers will be charged for their share of that benefit,” he said.

Contesting the OPC’s claim that Marylanders are unfairly footing the bill for out-of-state infrastructure, Shields said, “FERC has determined that the cost is not disproportionate.”

The OPC and other consumer advocates are asking FERC to fix the auction results, change how PJM splits up costs and ensure that customers get refunds if they’ve been overcharged.

OPC’s legal filings stressed that FERC has a statutory obligation to ensure that wholesale electricity rates are just and reasonable, and that allowing the 2025/2026 auction results to stand would violate that mandate.

The complaint asked FERC to act before June 1, when the new capacity charges will take effect. If successful, OPC estimates that the average BGE customer’s monthly bill would only increase by about $5.50, as opposed to the projected $16. Residential customers of other Maryland utilities would see similar outcomes.

If FERC cannot resolve the matter in time, it should order refunds to be processed retroactively once the issue is settled, the complaint added.

OPC’s broader warning is that unless PJM’s rules are corrected, Maryland customers will continue to face systemic overcharges. The agency argued that the stakes go beyond this year’s bills and touch on the long-term integrity and fairness of regional electricity markets.

“There is widespread concern among state ratepayers advocates about the impacts of data centers,” Lapp said in his comments. “We are all under-resourced relative to the utilities, generation companies, and the data centers themselves. Where we can, we coordinate our efforts.”