‘Unacceptable Outcome’: Murphy Calls For Investigation Into High Energy Costs

NEW JERSEY — Governor Phil Murphy is calling for a formal investigation into whether market manipulation resulted in higher energy prices for NJ businesses and consumers set to go into effect this summer.

In a letter sent to the Federal Energy Regulatory Commission (FERC), Murphy requested that agency leadership direct the commission’s enforcement unit to launch an investigation of the 2024 Base Residual Auction (BRA) for the 2025-2026 Delivery Year and examine whether market manipulation occurred.

If manipulation did occur, Murphy asked the commission to determine the extent to which that manipulation resulted in higher capacity auction prices and led to an increase in energy bills for families and businesses.

PJM Interconnection — the regional transmission organization that serves over 65 million people throughout NJ, Pennsylvania, Maryland, and more — hosts their auction to secure an adequate amount of reliable electricity from generators and to manage the availability of electric supply.

Following the results of the 2024 auction (which resulted in total costs of nearly $17.4 billion compared to the previous year’s $2.2 billion), officials said PJM is justifying an increase to the average customer’s electric bill by $20-25 per month.

In his letter, Murphy said the NJ Board of Public Utilities (BPU) estimates that PJM’s July 2024 auction alone will cost NJ ratepayers at least $1.7 billion, and could even exceed that.

The Murphy Administration is part of a multi-state effort to address these increases, and is compelling PJM to take responsibility for the nearly tenfold increase in the clearing price for the 2025-2026 Delivery Year.

“The manufactured PJM cost crisis was foreseeable and preventable,” Murphy said. “Today, I’m urging FERC to take immediate action to investigate the unacceptable outcome of PJM’s 2024 capacity auction — resulting in exorbitantly high price increases that PJM will unjustly pass down on to everyday New Jerseyans.”

“I am deeply concerned with how increasing energy bills will affect families and businesses as we head into the summer months, and I am calling on FERC to investigate whether market manipulation led to this harmful increase,” Murphy continued. “As the regulator, FERC must ensure that PJM is prioritizing the safe, reliable, cost-effective, and clean delivery of electricity — especially when neglecting this obligation will be at the expense of ratepayers.”

In an email statement sent to Patch, PJM responded to Murphy's letter, and said they have not seen evidence that supports a finding of market manipulation in the 2025-2026 capacity auction:

"New Jersey has insufficient generation in-state to meet its needs, and has to make up this difference through imports," PJM said. "A seven-year-long effort by New Jersey to fill this gap with offshore wind has failed to deliver any results whatsoever, and consumers are now paying the price for this failure."

"PJM has not seen evidence that supports a finding of market manipulation in the 2025/26 capacity auction, but we take such allegations very seriously," PJM continued. "The Federal Energy Regulatory Commission Office of Enforcement is the right place to address such a concern, and PJM will follow any directives we receive from FERC."

In February, the BPU announced the expected rise of electricity costs for most residents and small businesses in New Jersey, which came after a summer of energy rate hikes that had both residents and lawmakers demanding answers.

The increase came from the results of NJ's annual Basic Generation Service (BGS) auction, which sets the price that companies pay for electricity generated outside the state.

The BPU pointed to rising demand and a stressed power grid as reasons for the cost increase, and BPU President Christine Guhl-Sadovy said PJM (which operates the power grid used by NJ and 12 other states) needs to speed up the process of connecting more electric generation projects to the grid.

"The Murphy Administration will continue to aggressively push and hold PJM accountable to address rising costs by expediting interconnection and implementing additional market reforms,” Guhl-Savody said. “All of which will help drive down costs for ratepayers, which is a priority for the BPU.”

In the 2024 State of the Market Report, PJM’s Independent Market Monitor (IMM) concluded that the results of last year’s capacity auction were “significantly affected by” the exercise of market power through the withholding of categorically exempt resources, among other things.

Due to this, and other flaws, the IMM concluded that the auction clearing price did not “reflect supply and demand fundamentals” and “resulted in actual capacity market payments that were approximately twice as high as needed.”

By calling for an investigation into PJM costs, Murphy said there must also be a strategic plan by the grid operator to prevent a “future cost catastrophe.”

For residents struggling to afford utility bills, you can access state programs that can help with utility bills, rent, and energy efficiency programs here.

Editor's Note: This story has been updated with a comment from PJM Interconnection.

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