Pennsylvania’s energy landscape is at a crossroads. After decades of relatively flat electricity demand, energy use hit an all-time high in 2024 and continues to rise—driven by data centers, AI, industrial reshoring, and electrification. At the same time, tens of gigawatts of power plants have retired across the PJM region, and many renewable energy projects face delays or cancellations due to interconnection challenges, financing issues, and shifting federal policies.
The result? PJM Interconnection, which manages the electric grid for 13 states and the District of Columbia, is facing shrinking capacity reserve margins and may experience capacity shortfalls as early as 2027.
Why the Current Market Isn’t Working
PJM’s short-term capacity markets are based on one-year prices set three years ahead, which does not appear to be providing sufficient incentives for new generation investments with long lifespans. Developers and financial stakeholders must factor in substantial risk premiums when making long-term commitments, and those costs ultimately flow through the market to customers.
Meanwhile, existing power generators are recording record profits—some seeing 200-700% stock returns over two years.
These generators are profiting from the current system and there is no regulatory obligation for them to invest in the new generation needed to ensure reliable and affordable service for Pennsylvania families and businesses.
PECO’s Comprehensive Approach
At PECO, we’re not waiting for markets to solve this problem. We’re pursuing every available option to ensure reliable and affordable energy for customers. Ensuring energy affordability requires more than hoping markets will deliver—it demands active engagement across policy, innovation, and infrastructure to build a resilient energy future for Pennsylvania.
Here’s what we’re doing:
Expanding Renewable Energy: We’re investing in our people and systems to enable and incentivize customers to connect solar and other distributed energy resources more quickly and affordably. We’re supporting legislation like HB 504 to expand access to renewable energy through community solar projects and renewable natural gas development, with a focus on serving underserved populations who may not be prioritized by third-party developers.
Advancing Energy Efficiency: We’re working to modernize Pennsylvania’s energy efficiency framework through comprehensive reform of the Act 129 program (HB/SB 505) to promote innovation, flexibility, and equity in energy efficiency and grid resilience efforts while reducing regulatory risk.
Pursuing Long-Term Power Purchase Agreements: We’re assessing long-term contracts with generators, with appropriate cost recovery assurances to provide price stability and ensure adequate supply, giving developers the certainty they need to invest in new generation while protecting customers from short-term market volatility.
Deploying Battery Storage: We’re exploring options to encourage battery storage deployment that can help balance supply and demand, store excess renewable energy, and provide grid stability during peak demand periods.
Implementing Demand Response: We’re reducing peak demand through programs that incentivize customers to shift energy use to off-peak hours, helping to flatten demand curves and reduce strain on the grid.
Advocating for Market Reforms: We’re pushing for structural changes to PJM’s capacity markets that provide better long-term price signals and incentivize new generation investments. We’re also supporting customer protection measures like SB 312, which would protect customers from overpriced supply contracts by requiring competitive suppliers to return customers who don’t provide affirmative consent to supply rate increases to default service at the end of their contracts.
Ensuring Fair Cost Allocation: We’re supporting policies that ensure data centers and other large energy users pay their fair share of grid upgrade costs, preventing residential customers from subsidizing infrastructure built primarily for industrial-scale demand.
Investing in Transmission and Infrastructure: PECO is investing nearly $10 billion over the next five years to upgrade the energy grid, including critical transmission projects that alleviate constraints and improve reliability.
Regulated Generation as a Backstop: If competitive markets fail to meet customer needs despite these efforts, PECO stands ready to invest in building and owning generation through partnerships with top developers—but only as a last resort to ensure energy security for Pennsylvania customers.
The Path Forward
The risks of inaction—reliability failures and continuously higher prices—are too great to ignore. PECO is committed to pursuing every viable solution to ensure customers have the reliable, affordable energy they deserve.
We’re pursuing a diversified strategy that includes renewables, storage, demand response, energy efficiency, and market reforms—with each solution playing a critical role in meeting customer needs.
We ultimately need a structure and process that ensures we have enough energy supply to meet demand—one that leverages every available tool and always results in the best outcome for our customers.