How Electricity Capacity Costs Affect Healthcare Facilities

By Kaela McLarney | November 2025

What Is Capacity and What Does the New PJM ‘CAP’ Means for Healthcare and Long-Term Care Facilities

In April of 2025, the Federal Energy Regulatory Commission (FERC) approved PJM Interconnection’s proposal to establish a temporary price “cap” – setting a $325/MW-day price cap and $175/MW-day price floor – for its next two base capacity auctions. While this regulatory change may seem distant from day-to-day operations, it has direct implications for energy costs, procurement planning, and risk management across healthcare and long-term care facilities.

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Capacity: The Prequel

Capacity and transmission costs are heavily impacting electricity prices, with capacity and transmission accounting for approximately 25-30% (compared to 17% in 2019).

Results for the 2025/2026 PJM Auction:

The capacity auction for the 2025/2026 delivery year resulted in record-high prices of $269.97/MW-day for much of the PJM footprint, compared to much lower prices for the 2024/2025 auction (see graphic below). This significant increase was driven by a combination of tighter supply, higher demand, and new market rules approved by FERC. The highest prices were seen in the BGE and Dominion Zones, which are transmission capacity constrained, leading to prices of $466.35/MW-day and $444.26/MW-day, respectively. The average commercial customer saw their electric bill increase by an additional 2-4¢ per kWh.

Several factors contributed to the sharp increase in capacity prices:

• Power Plant Retirements: The retirement of several power plants reduced the available capacity by approximately 6,600 MW compared to the previous auction.
• Increased Demand: The projected peak demand for electricity increased from 150,640 MW to 153,883 MW. (A surge in AI and data center demand is expected to continue to drive up electricity costs)

Implications for Healthcare and Long-Term Care Energy Budgets

Healthcare and long-term care facilities face unique energy challenges: 24/7 operations, high HVAC loads, and the need for uninterrupted power to maintain patient safety and compliance. These organizations already allocate a significant portion of their budgets to energy procurement and backup generation.

PJM operates the largest electricity market in the United States, serving parts of the Mid-Atlantic and Midwest. Its capacity market ensures enough generation resources are available to meet future demand, and the resulting capacity prices indirectly shape the rates healthcare institutions pay for electricity through supply contracts.

When PJM’s last capacity auction cleared at nearly $270/MW-day, up from just $29/MW-day the year before, hospitals, senior living facilities, and other energy-intensive organizations saw – or soon will see – double-digit increases in electric bills, in some cases approaching 20%.

Strategic Takeaways for Facility Executives

For executives overseeing hospital systems, nursing homes, and senior living communities, this FERC decision underscores the importance of proactive energy management.

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Key actions to consider:

• Reassess electricity contracts: Evaluate current procurement terms and renewal timelines. Discuss pass-through options. Don’t pay for a bloated estimation.
• Diversify supply sources: Interruptible natural gas customer who can utilize propane or heating oil during a price spike? We can assist with that.
• Invest in resilience: Prioritize energy efficiency and backup power projects that enhance operational reliability and patient safety. Need a firm ROI? Let us do the calculations.
• Monitor regulatory shifts: Track PJM and FERC updates, as further reforms to capacity pricing and interconnection processes could reshape cost structures again.

Get In Touch

With a rapidly changing energy market, reach out to your energy advisors as soon as possible to discuss how you can manage your capacity costs.

Kaela McLarney works with PA Health Care Association members, and regularly discusses skill nursing and assisted living community facility energy needs – email her today at kmclarney@shipleyenergy.com or call 717-771-0779.