Electricity Rates Are Set To Rise This Summer, This Is How Owners and Tenants Can Manage The Increase
Building owners and tenants take heed, a significant electricity rate increase is on the horizon, but there is something you can do to prepare and curtail costs.
Last July, PJM Interconnection, which manages the electric grid for the District of Columbia and 13 states including Ohio, announced a significant rise in capacity costs which increased from $2.2 billion to $14.7 billion for the 2025-26 delivery year, with further increases expected for the 2026-27 delivery year.
PJM cited the demand for artificial intelligence along with the growing presence of data centers, new market rules which include the transition to green energy, and the decommissioning of power plants as the cause for the increase which it will pass on to consumers.
According to PJM, its grid’s peak demand growth rate quadrupled between 2022 and 2024. The increased demand means that the current capacity could become inadequate by as early as 2027 and affect the grid’s reliability.
Capacity rates maintain grid reliability, ensuring that when demand is high, there is enough power to serve everyone which prevents blackouts. To do this, PJM must find power plants that can respond when extra power is needed, which it does at auction.
Each year, commodity auctions take place in March and November and those rates hold for 12 months. Historically, capacity rate increases, which are established at auction in November, have held for 36 months, explained Rob Myers Founder and Managing Partner of TogetherSolve, an energy advisor and consultant. Due to the additional strain on the grid, we now expect that the capacity pricing increase will now only hold for 12 months as well, he continued.
The spike in demand is expected to conservatively result in a rate increase of 35% for consumers this year, said Myers.
This increase, which is expected in June 2025, combined with past increases over the last three years, means rates have risen by roughly 80% in that same timeframe, he noted.
“This creates an additional hurdle for commercial building owners and tenants in a market where high construction and lending costs have already challenged the market,” said Matt Gregory, managing director at NAI Ohio Equities.
Energy costs are the second largest expense after taxes for building owners and tenants, explained Myers.
“Lowering utility costs brings down operating expenses and can make a building or space more competitive in the market,” he said.
Myers says that there are ways to proactively manage these increases, and on average, these strategies save their clients 20 – 40% on their energy bills.
“We’ve had tremendous success working with TogetherSolve and it has made an enormous difference in lowering energy costs for both our brokerage and property management clients,” said Gregory.
Options for reducing expenses include working with a supplier to negotiate rates and demand response programs that can help offset price increases by rewarding customers for curtailing their usage, said Myers.
