Legal Bulletins

For some time, we have been predicting that electricity prices in Maryland, and particularly in BGE territory, are likely to increase significantly in the near future. There are a number of reasons, but a significant cause is the retirement of fossil fueled generation before sufficient renewable power (and associated battery backup) is available.

Simply put, the laws of supply and demand have not been repealed. Maryland is facing decreased supply as fossil fuel plants are retired and increased demand from the transition to electrification for transportation, building HVAC and new, power-hungry, technology. The situation is further aggravated by Maryland being a persistent net importer of electricity for over 1/3 of its consumption over the past few decades.

That prediction looks likely to come to fruition starting next summer. The generation portion of electric bills may begin to increase by 50% or more beginning in June of 2025.  This appears to be the inevitable result of the most recent capacity auction conducted by the regional grid operator, PJM.

PJM (originally Pennsylvania, Jersey and Maryland but now encompassing parts of 13 states), conducts an auction to establish sufficient capacity to assure reliability.  Capacity, in this context, is basically a guarantee that there will be sufficient supply during peak demand periods. Historically that has been during hot summer days when air conditioning labors under heavy loads but will likely transition to cold winter nights as the state tries to force a transition from fossil fuel heating to electric heat pumps.

For the 2024/2025 year, the capacity auction price was $28.92 per megawatt day. The auction price for 2025/2026 soared to $269.92 per megawatt day for the region – nearly ten times higher.  Because of supply and transmission constraints, the capacity price for the BGE delivery area was even higher – an astounding $466.35 per megawatt day.

PJM described the causes. First, retirements (or announced retirements) will total approximately 6,600 megawatts of power. This is essentially the forced retirements (or announced intent to retire) of fossil fueled plants like the coal-fired Brandon Shores power plant.

Second, replacements have been slow:

…PJM remains concerned with the slow pace of new generation construction. Approximately 36,000 MW of resources have already cleared PJM’s interconnection queue but have not been built due to external challenges, including financing, supply chain and siting/permitting issues.

It should also be noted that much of the resources in the queue are renewable sources, such as solar and onshore wind, and cannot be relied upon to produce peak supply at any time it is requested, adding very little to system reliability. The sun doesn’t always shine, and the wind doesn’t always blow. Therefore, greater quantities of renewable power combined with battery backups, are needed to replace an otherwise equivalent amount of fossil fueled power. For example, estimates are that it would require something like 35,000 acres of solar cells to replace the supply from the Brandon Shores plant.

As PJM stated it:

The amount of supply resources in the auction decreased again this year, continuing the trend from recent auctions and underlining PJM’s stated concerns (PDF) about generation resources facing pressure to retire without replacement capacity being built quickly enough to replace them. 

At the same time, the peak load forecast has increased by over 3,200 MW.  Some of this may be due to the projected rise of data centers but another major factor is the transition to electric vehicles and the electrification of building heating systems.

The predicted price increases add to concerns about the pace of transition mandated by the state Climate Plan. Governor Moore’s Executive Order calls for “a framework for a clean energy standard to achieve 100% clean energy by 2035…”

Unless the development of renewable energy (especially solar farms) is quickened, fossil fuel retirements are slowed or massive new transmission lines are built, a transition on that schedule risks significant price escalation. The state’s climate plan does call for faster development of utility scale solar but, to date, progress on that front has been very limited.

PJM estimates that the auction’s total cost to consumers jumped to $14.7 billion from the $2.2 billion in the last auction. 

Michael Powell
410-576-4175 • mpowell@gfrlaw.com