On July 31, 2024, PJM, Ohio's regional transmission organization responsible for coordinating wholesale electricity movement in the state, announced a significant increase in the "cost of capacity" for most utilities starting June 1, 2025. This adjustment is expected to impact electricity bills across Ohio.
The electrical grid must maintain sufficient supply to meet peak demand and ensure reliability. Capacity charges are a component of energy bills that help maintain this reliability. Recent changes in PJM's grid capacity—driven by rising energy demand, retirement of outdated power plants, and shifts in measuring plant reliability—have led to a substantial increase in capacity prices during an auction held at the end of July.
Ohio electricity consumers have already experienced rate increases over the past one to two years. Previously, rates rose steadily between 3-6% annually. However, some customers have noticed as much as a 30% increase recently. The announced rise in capacity pricing will likely result in further increases on consumer electric bills.
Retail electricity suppliers such as AEP, AES, Duke Energy, and First Energy are expected to pass these increased costs onto consumers through higher tariff charges or rates. Industry analysts predict residential customers may see an increase of about 2 cents per kilowatt hour.
Utility companies will start paying the new rates on June 1, 2025. Utility charges can change up to five times per year depending on the provider, typically occurring on January 1, April 1, June 1, July 1, and October 1.
Due to various factors involved, it is challenging to determine the exact timing or extent of these rate hikes. It is anticipated that electricity companies will soon communicate upcoming rate changes with their customers.
The recent capacity charge adjustment was part of an auction traditionally held annually but delayed for three years. The next auction is scheduled for December 2024 and will influence future capacity charge rate changes starting June 2026.
In light of these developments and ongoing infrastructure upgrades and market changes affecting costs passed down to consumers over the coming years, installing solar energy systems could be a viable option for locking in fixed electricity rates long-term.