The 2026/2027 PJM Base Residual Auction cleared at the administrative price ceiling of $329.17/MW-day – a result that is as surprising as it is logical.
This result reflects a combination of tightening supply fundamentals, increasing reliability concerns, and evolving market rules that have not yet produced meaningful constraints on price increases.
The auction secured 134,311 MW UCAP, plus another 11,933 MW UCAP from FRR entities, totaling 146,244 MW UCAP.
That’s just 139 MW above PJM’s reliability requirement, a margin so slim that it underscores how precarious regional supply is.
All zones, including previously capped ones like BGE and Dominion, cleared uniformly at $329.17. In other words the ceiling didn’t suppress prices in select areas; it became the clearing price for the entire footprint.
Politically, this outcome intensifies existing fault lines. Last week, New Jersey threatened to leave PJM, citing structural unfairness in pricing. That warning followed a joint letter from seven governors, who bluntly flagged the auction’s misalignment with real-world constraints. Their message was clear: market design is failing in practice – and the ceiling result only bolsters their argument.
That outcome reflects inaction on multiple fronts: stalled Reliability Resource Initiative volumes, slow progress on FERC Order 2023’s interconnection reforms, and regional constraints in zones like EMAAC and ATSI.
Notably, proposed exits like the threatened New Jersey shift take this to a tipping point: states are now considering moving assets to state-run or dual markets, threatening PJM’s core functioning.
For asset owners and investors, the takeaway is stark: the right location pays premium returns, but the likelihood of further political intervention and regulatory risk has jumped. A ceiling clearing increases project IRRs – but also magnifies volatility in contract negotiations and credit agreements.
The ceiling result may catalyze reform – but it may also spark fragmentation and further improvisation in price discovery.
This auction was supposed to offer clarity; instead, it has amplified uncertainty.
