Energy inflation’s key indicator! AI-driven electricity surge pushes America’s biggest grid auction prices to new highs, with households and businesses footing the bill

From New Jersey to Chicago, families and businesses covering this region are about to pay record-high electricity costs, because power costs on the largest U.S. power grid are rising rapidly amid an AI-driven surge in demand.

PJM Interconnection LLC, which operates the power grid covering 13 states and serving nearly one-fifth of the U.S. population, said its latest auction to ensure power supply will impose $16.4 billion in costs on consumers.

This mechanism, known as the “capacity auction,” determines the compensation generators receive simply for being on standby to provide power in the annual period starting June 2027. Results published Wednesday show the daily cost of these power supplies rose from the previous $329.17 per megawatt to $333.44 per megawatt. Households and businesses will bear these costs through their monthly electricity bills.

This is PJM’s third consecutive record-breaking auction result and has made it a key indicator of energy inflation. Because this grid region houses the largest concentration of data centers in the U.S., the rapid growth in electricity demand is squeezing supply and pushing prices higher. According to Monitoring Analytics LLC, the federally designated PJM regulator, in the last auction, data center electricity demand directly contributed to 45% of the cost increase.

The biggest beneficiaries of this auction will be independent power producers. As the AI boom drives a surge in power demand, the stock prices of these companies have soared, including Constellation Energy, Talen Energy, NRG Energy, and Vistra.

In after-hours U.S. trading Wednesday, Vistra’s stock rose 2.2%, while Talen Energy increased 3.3%.

Despite the soaring costs, this auction failed for the second consecutive year to secure enough electricity supply to meet projected demand. According to grid reliability requirements, a 20% reserve capacity rate is needed, but this auction only reached 14.8%.

Stu Bresler, PJM’s Senior Vice President of Market Services and Strategy Execution, said in a Wednesday conference call with reporters, “We are undersupplied. The vast majority of new demand in this auction comes from data centers.”

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