In PJM states, data center growth reaches commercial buildings through the capacity charge, a line on the electric bill set by each account’s demand during the grid’s busiest hours multiplied by an auction price. That price has risen roughly tenfold in parts of the region since 2024. Owners can lower their share by reducing demand during those peak hours.
One Line on the Bill Now Tracks Data Center Growth
$28.92. That was the price per megawatt per day that PJM Interconnection’s capacity auction set for the Chicago area for the year beginning June 2024. One year later the same price was $269.92. For the year beginning June 2026 it hit the auction cap of $329.17 across the entire region, and it has stayed near the cap since. The most recent auction, held in July for 2028 to 2029, cleared at the $325 cap and still came up 6,831 MW short of the amount PJM says it needs for reliability.
PJM runs the grid for 67 million people in 13 states and Washington, D.C. Its capacity auction pays power plants, batteries and customers who agree to cut use to be available on the hottest and coldest days. Utilities pass that cost to customers in proportion to how much power each account draws during the system’s busiest hours. That share is called the peak load contribution, and it sets a building’s capacity charge for the following year.
For a building owner, the capacity charge behaves differently from the rest of the bill. It depends on a few hours of the year, it resets annually and it has become one of the fastest-rising costs in commercial operations.
Who Set the Price
Several forces pushed capacity prices up at once: older plants retiring, rule changes that lowered the credit some plants receive and new demand. Data centers account for most of the new demand.
Monitoring Analytics, PJM’s independent market monitor, told members in August that data center load growth added a combined $29.4 billion to capacity costs across the last four auctions. It said that “this total will continue to grow until the issues associated with the addition of large data center loads are addressed.” Through July, total wholesale power costs in PJM rose 46%, from $79.57 to $116.53 per megawatt-hour.
Energy and Environmental Economics (E3), in a May study funded by the Data Center Coalition, attributes about half of the price increase in the 2024 to 2025 and 2025 to 2026 auctions to load growth and the other half to supply-side factors such as retirements and market design. Both accounts point the same way: the arrival of large new loads raised the price that every customer pays for capacity.
Commercial customers have already felt it. Lawrence Berkeley National Laboratory (LBNL) reports that nominal commercial electricity rates rose 26% from 2019 to 2025, and that utilities requested $18 billion in rate increases in 2025, the most in decades.
What Large-Load Tariffs Fix and What They Miss
States have responded with special rate classes for very large customers. Missouri’s rules, approved for Ameren Missouri and Evergy, require contracts of at least 12 years, a monthly minimum charge set at 80% of contracted demand, collateral equal to two years of minimum bills and at least 24 months of notice before leaving. In Florida, regulators take up Duke Energy Florida’s proposed tariff for loads of 50 MW or more on November 3; commission staff recommended rejecting it as filed because it leaves open whether each large customer pays its full cost of service.
At the federal level, the Senate permitting bill would require data centers of 20 MW or more to pay both their share of existing transmission and the new costs they cause.
These rules address the wires and substations built to serve a data center and the risk that a customer leaves before paying for them. They do not set the capacity auction price. In a region such as PJM, every customer buys capacity in the same market, so new demand that pushes the price up affects all of them regardless of who built which substation.
More Increases Are Already in the Pipeline
The capacity charge is one part of a broader rise in what commercial customers pay. LBNL notes that regulators approved 64% of the dollars utilities requested in rate cases from 2021 to 2025, and it expects “additional near-term price increases absent policy/market actions.” The share of income households spend on electricity rose in 27 states and Washington, D.C., since 2019, with the largest increases in Washington, D.C., Pennsylvania, California and Maryland, all but California within PJM.
Demand forecasts point the same direction. PJM raised its forecast peak for 2028 to 2029 by about 2,000 MW over the prior year, and data center loads continue to be added. In Florida, Duke Energy Florida reported system studies requested by 13 customers above 50 MW, the smallest at 160 MW, while a company witness testified the utility can serve one 55 MW customer before its current rate settlement expires at the end of 2027.
Utilities and data center developers argue that well-designed tariffs turn this growth into a benefit. E3 counts at least 38 large-load tariffs adopted since 2018, 30 of them in 2025 and 2026, and found that four Amazon facilities each paid their utilities about $3.4 million a year more than the added cost of serving them. Ameren Missouri projects about $21 million in customer savings by 2028 from data center growth. Consumer advocates in Missouri say the rules will not keep data centers from raising rates.
What It Means by Property Type
How the capacity charge lands depends on the lease. In office buildings on gross or modified gross leases, the owner usually pays the electric bill for base building systems and common areas, so a higher capacity charge comes directly out of net operating income. In net-leased retail and industrial properties, tenants typically pay their own bills, and rising capacity costs raise their occupancy cost and can weigh on renewal negotiations. In multifamily buildings, owners carry common-area and central-plant loads, which often peak on the same hot afternoons as the grid.
The asset types with the most control over their peaks, such as buildings with central plants, thermal storage, batteries or flexible industrial processes, have the most room to reduce this cost.
When Load Growth Lowers Rates, and When It Does Not
Utilities often argue that new large customers spread fixed costs across more sales and lower everyone’s rates. There is evidence for that. LBNL found that from 2019 to 2024, states with the most load growth saw inflation-adjusted electricity prices fall, while states with shrinking demand saw them rise. E3 found that Texas and Virginia had the largest load growth and among the smallest rate increases.
The same researchers add limits. LBNL found the effect was weaker for residential customers and said it is unclear whether the pattern holds when load grows quickly. The benefit also depends on the load arriving. Pacific Gas and Electric Company (PG&E) says each gigawatt of new data center demand could lower customer bills by 1% or more. It has connected 174 MW of data center projects since 2024 against a pipeline of about 12.9 GW, and its chief executive expects about 1.8 GW by 2030. Building owners in PG&E territory should plan budgets without that relief.
How Owners Shrink Their Peak Load Contribution
The capacity charge rewards owners who know when the grid peaks and act during those hours.
Find the number. Ask the utility or retail supplier for each account’s peak load contribution and the capacity rate behind it. It appears on many commercial bills or supply contracts.
Cut use during peak hours. Pre-cool buildings, dim noncritical lighting, shift equipment schedules and discharge batteries during the grid’s busiest summer afternoons. A lower peak this year lowers next year’s charge.
Get paid for flexibility. PJM demand response programs pay commercial customers to cut use during grid emergencies, which historically occur one to two times a year for two to four hours.
Read the lease. Determine whether capacity costs pass through to tenants or stay with the owner, and whether the lease gives the owner control over peak-hour operations.
The capacity price is set in an auction no building owner controls. The share each building pays is set by its own demand during a handful of hours, and that share is within reach.
Frequently Asked Questions
What is a capacity charge?
A charge that pays power plants, batteries and flexible customers to be available when the grid is under the most stress. In PJM it is set by an annual auction and divided among customers by their demand during peak hours.
What is a peak load contribution?
The utility’s measure of how much power an account drew during the grid’s busiest hours. It determines that account’s share of capacity costs for the following year.
Do large-load tariffs lower my capacity charge?
No. They require large customers to pay for the grid equipment built to serve them and protect against early exit. The regional capacity price is set separately in PJM’s auction.
Will data centers lower electric rates?
Sometimes. Research shows load growth has lowered average prices in some states by spreading fixed costs, but the effect depends on how fast load arrives, how costs are allocated and whether projects get built.
Sources
https://irma.org/resources-for-businesses-facing-higher-capacity-charges/
https://www.utilitydive.com/news/data-center-pjm-wholesale-market/828917/
https://www.ethree.com/electricity-rate-drivers-data-center-role-2026/
https://psc.mo.gov/General/Utility_Tariffs_for_Large_Load_Customers
https://www.sec.gov/Archives/edgar/data/0001004980/000100498026000056/pge-q32026pressrelease.htm
https://www.enelnorthamerica.com/solutions/energy-solutions/demand-response/pjm-demand-response