Gov. Josh Shapiro announced a settlement with PJM Interconnection, claiming the deal will save Pennsylvania taxpayers more than $21 billion in utility charges.

The first-term Democrat announced the deal this week, nearly a month after suing PJM over last summer’s record-high power auction prices.

PJM is not a power company. It coordinates wholesale electricity movement across Pennsylvania, a dozen other states, and the District of Columbia. PJM uses market capacity auctions with electricity generators to receive commitments to meet future power demand.

Last year’s auction prices spiked 700 percent from $2.2 billion for 140,416 megawatts of electricity in 2023 to $14.8 billion for 135,000 MW.

That caused Shapiro to complain to the Federal Energy Regulatory Commission (FERC). The governors of Delaware, Illinois, Maryland, and New Jersey expressed support for the complaint.

Court documents failed to mention a key factor in auction price jump: Electricity supply is down and demand is up, as more of America’s power needs are pushed onto electricity.

PJM Board of Managers Chair Mark Takahashi expressed worries about capacity before Shapiro went to FERC.

“The PJM system could see a capacity shortage as soon as the 2026-27 Delivery Year,” he wrote on Dec. 9.

Not only did Takahashi point toward data centers for the increase in demand, but he also complained about the rapid retirement of thermal generators like coal and natural gas. He said the retirements happened due to “policy and economic pressures. Takahashi added replacement generations took too long to come online due to “siting, permitting and supply chain constraints.”

PJM previously said between 24,000 and 58,000 MW of electricity generation would be retired by 2030 and not be replaced. It blamed almost 20,000 of those retirements on state and federal regulations.

Those rules included a Biden-Harris administration order for existing coal-fired and new natural gas-fired power plants to capture 90 percent of all carbon emissions by 2032. The regulation has yet to be revoked by the Trump administration but is expected to happen. Lee Zeldin was sworn in to head the Environmental Protection Agency this week.

The North American Electric Reliability Corporation (NERC) echoed Takahashi’s comments. Two weeks before Shapiro’s suit, NERC analysts said there was an ‘elevated’ risk of power outages on the PJM grid this winter due to demand, generator retirements and performance, and fuel supply issues.

The NERC report added renewable energy sources, like solar, could not be counted on in an energy shortfall. “Solar resources are not likely to contribute during some of the coldest hours, resulting in very low total electricity supply and thus projections of load loss,” wrote analysts.

That didn’t stop Shapiro from putting pressure on PJM through his complaint. In a subsequent letter sent to the PJM Board of Managers on Jan. 15, he asked them to intervene in the dispute to prevent a “vast wealth transfer.” The governor also threatened to remove the Keystone State from the PJM system.

A PJM spokesperson told DVJournal the two sides started talking after the governor’s letter. He declined to discuss details of the conversations.

PJM plans to lower the auction cap from $500 per MW-day to $325 per MW-day for the next two capacity auctions. The auction floor will be $175 per MW-day. PJM needs permission from the Federal Energy Regulatory Commission for the plan.

“PJM did the right thing by listening to my concerns and coming to the table to find a path forward that will save Pennsylvanians billions of dollars on their electricity bills,” the governor said in a statement.

Meanwhile, state Sen. Gene Yaw (R-Bradford) announced a bill he thinks will stabilize the grid. Yaw said his proposal orders the state Departments of Community and Economic Development and Environmental Protection to find places for natural gas generation projects. He said that helps PJM off-set any the electric generation shortfall.

“Since 2019, there have been no new investments in baseload electric generation in Pennsylvania. o maintain our position as the energy powerhouse of the mid-Atlantic and meet growing energy demands, we need to be investing in new generation capacity now,” Yaw said.