ERCOT
There are two words that describe the reaction of most commercial clients shopping for electricity in Texas: Sticker Shock. Figure 1 shows how the wholesale price of electricity for calendar years 2025 through 2028 has traded over the last four years. In ERCOT, electricity markets were at all-time lows of approximately $20/MWh in the months immediately before the pandemic. Over the last 48 months, power prices in ERCOT have more than doubled as wholesale prices are now more than $50/MWh for calendar years 2025 through 2028. The steady rise of electricity prices in ERCOT is largely driven by concerns that there is not enough supply to meet growing demand across the state. This demand is coming from power-hungry data centers used to support the rapid growth in AI, technology, and cryptocurrency mining in addition to manufacturing and population growth throughout the state. While substantial amounts of electricity from new solar and wind-generating assets have come online, those intermittent resources cannot be counted on to operate on demand. These are some of the dominant factors that have pushed up wholesale electricity prices in ERCOT.
Figure 1. Calendar Year Wholesale Electricity ERCOT, by 5
One small measure of relief in the market can be seen in Figure 2, which zooms in on the red circle in Figure 1. Figure 2 shows that apart from a few weeks between early April and late May 2024, longer-term prices are less expensive than near-term prices. This has produced some backwardation in the market where clients will see lower prices in 24, 36, and 48-month offers compared to 12-month terms. And while clients may be surprised at how high prices in ERCOT are today, there is still room for prices to continue to climb as the summer progresses. A hot summer will likely push prices even higher than they are today. It would be wise for clients with electricity contracts expiring in the next 6 to 12 months to consider renewal options now before prices get worse.
Figure 2. Calendar Year Wholesale Electricity ERCOT, by 5
PJM
In PJM, the big story this summer will be the outcome of the capacity auction in July, which will set the price for capacity in PJM beyond May 2025. Our next 5 by 5 will report on the outcome of this auction and interpret what it means for electricity buyers. In terms of wholesale electricity, the story is similar to Texas. The growth in data centers and AI is fueling concerns about enough electricity supply to keep up with demand. Like Texas, these concerns are also pushing up power prices in PJM. Figure 3 shows how wholesale electricity has traded at the PJM West trading for calendar years 2025 through 2028. Like ERCOT, wholesale prices rose steadily from January 2020 where prices were approximately $28/MWh to as much as $62/MWh in June and November 2022. Over the last 18 months, there has been a significant amount of volatility and price separation. Note that prior to March 2023, there was little difference in prices for calendar years 2025 through 2028. That began to change last spring as prices in the outer years (2027 and 2028) began to trade at a premium to 2025 and 2026. Today, in PJM there is a strong contango market where calendar year 2025 is trading at $46.79/MWh while calendar year 2028 is trading at $55.43/MWh. In this kind of bull market, a different purchasing strategy is required, especially as we await the outcome of the PJM capacity auction in July.
Figure 3 . Calendar Year Wholesale Electricity PJM, by 5
NYISO
Like other states, there are concerns about having sufficient power supplies to meet the growing demand for electricity in New York. These concerns around adequate supplies are driving up wholesale electricity prices, especially in New York City. Figure 4 shows that wholesale prices for calendar years 2025 through 2028 were trading on top of each other through May 2023. A distinct separation of prices can be seen beginning in June 2023, where calendar years 2026 to 2028 started to trade at an $8 to $10/MWh premium to 2025. A mild winter pushed prices down through February 2024 but there has been a distinct rally heading into the summer across all calendar years. Today, calendar year 2025 is trading at $56.95/MWh, while calendar year 2028 is trading at $67.40/MWh. On the whole, decent purchasing opportunities exist for the calendar year 2025 as it is trading 34% lower than its most recent high of $83.67/MWh in September 2022.
There is a significant amount of uncertainty in the NYISO around the valuation of capacity, which is the second largest cost component of a retail electricity price. The NYISO is in the process of resetting the demand curve for the 2025 - 2029 capability period, which is instrumental in setting the price of capacity for all electricity customers. For many New York clients, the best purchasing strategy in the near-term may be to fix the energy and pass through capacity charges until there is more certainty around the state’s demand curve and the future price of capacity. 
Figure 4. Calendar Year Wholesale Electricity NYSO, by 5
