PJM 2026/2027 Base Residual Auction – Two Questions

By Avalon Energy Services | September 15, 2025

PJM 2026/2027 Base Residual Auction – Two Questions

After our posting concerning PJM’s 2026/2027 Base Residual Auction results, two questions by several readers arose. We attempt to answer them below.

First some background.

Last year, on July 30, 2024, the results of PJM’s Base Residual Auction (BRA) were announced for delivery year 2025/2026, clearing at levels significantly higher than ever before. The RTO price came in at $269.92/MW-day, a more than nine-fold increase compared to the previous deliver year. Two constrained delivery zones cleared at even higher levels, $444.26/MW-day in the DOM Zone and $466.35/MW-day in the BGE Zone.

Read more here.

Question #1 – Where Did The $4.17/MW-day Come From?

On July 22, 2025 PJM announced the clearing price for delivery year 2026/2027 was $329.17, which is $4.17 higher than the previously announced cap of $325/MW-day. Why the difference?

Well, PJM uses a natural gas base cost, also known as the Reference Resource’s Cost of New Entry (CONE). PJM uses a combustion turbine that runs on natural gas as its reference resource. This is PJM’s estimate of the cost to build, own, and operate a new natural gas-fired combustion turbine over its lifetime. This CONE serves as a key input in setting the market seller offer cap (MSOC). The MSOC is the maximum price that could be bid in the capacity auction.

The cap agreed to by PJM was this MSOC, rather than a fixed $325/MW-day, and which was recalculated after April 1, 2025 and before the auction resolved on July 22, 2025.

The graph below shows the recent 2026/2027 auction results and also the “new” capacity price cap and floor (both is red).

Question #2 – What Fills the Gap?

On July 22, 2025, PJM reported that it secured 134,311 MW of capacity during its 2026/2027 Base Residual Auction (BRA).

During the summer of 2025, PJM’s highest coincident peak demand was 160,153 MW (6/23/25, HE 18), nearly 20% higher. So, how does PJM make up the difference when actual demand exceeds the amount of capacity secured through its BRAs?

PJM secures capacity for typical peak conditions, not extreme outliers. When demand spikes above the secured level of capacity, PJM can tap into several additional resources:

Energy-Only Resources

These are generators that didn’t clear the capacity auction but still participate in energy markets.
They’re paid only when dispatched, often during high-price hours.
Think peaker plants, merchant generators, and some renewables.

Imports from Neighboring Grids

PJM can import power from MISO, NYISO, and others.
These imports aren’t always committed in the BRA but can be scheduled in real time.

Demand Response & Load Management

Large customers reduce usage during emergencies.
PJM calls on these programs during “Maximum Generation Emergencies” (like the one declared in June).

Emergency Procedures

PJM can delay non-essential maintenance, dispatch reserves, and even curtail interruptible loads.
These actions are part of its “Operating Reserve Demand Curve” (ORDC) framework.

Capacity Performance Penalties and Incentives

Resources that underperform during peak events face financial penalties.
This motivates over-performance and availability beyond the auction commitment.

If you have questions about how any of this will affect your electricity bill or how you might manage your energy supply costs, please contact us.

The Avalon Advantage – Visit our website at www.avalonenergy.us, call us at 888-484-8096, or email us at info@avalonenergy.us.

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Posted in Electricity, Energy, Grid, PJM, and tagged Electricity, Energy, Grid, PJM

Posted in Electricity, Energy, Grid, PJM and tagged Electricity, Energy, Grid, PJM