By Kennedy Maize
The PJM Interconnection, the oldest and largest U.S. independent electric transmission system operator, on Wednesday (May 6) announced it has launched an effort to reform its troubled and controversial competitive energy capacity market. The announcement came just five days after PJM named insider David Mills its new president and chief executive officer. 
Mills had been acting in the top PJM job since January, after Manu Asthana announced late last year that he would step down after six years leading PJM. Mills had served on the PJM Board of Managers since 2021 and board chairman since May 2025.
PJM linked the announced reform effort to the publication of its 70-page Powering Reliability Through Market Design publication, also released on Wednesday. The regional transmission organization said the report “frankly assesses the current industry landscape of high prices, burgeoning electricity demand and reluctant investors, and catalogues the foundational decisions that will be required of industry and government to meet those challenges for the long term.”
The PJM move also comes in the context of giant Ohio-based utility American Electric Power suggesting it is considering leaving both PJM and the Southwest Power Pool due to long wait times to interconnect new generation. Utility Dive reported that AEP CEO Bill Ferman in a conference call with analysts during the utility’s unveiling of its quarterly earnings said, “We’re committed to participating in a market that’s responsive to the customer needs, but we also know that we have to figure out a way to get it to move more efficiently and more effectively.”
Politico’s E&E News commented, “Pennsylvania-based PJM, regulated by the Federal Energy Regulatory Commission, is beset by criticism from governors and members of Congress who face midterm election voters angry about higher electricity prices that have fueled inflation fears.”
In its news release, PJM said, “The PJM Board of Managers has recognized that current price volatility – while economically rational – is eroding the public-private compact that allows the market to function, and that the basic assumptions of the capacity market must be reexamined in a resource-constrained world.”
In a foreword to the new PJM report, Mills said, “The Board asked PJM to examine whether the foundational assumptions of the market remain valid – and if not, what a valid set of assumptions would require. The paper that follows is an honest attempt at that examination.”
The report lays out three competing “general frameworks” to guide its inquiry.
- Keeping “the shared responsibility for one level of reliability for all, protecting consumers by requiring most electricity demand to be covered through long-term forward commitments that shield consumers from price spikes and support needed investment.”
- Accepting “that reliability can no longer be rationed equally and differentiate reliability standards across load, geography or customer class, prioritizing those that contribute to or value reliability most.”
- Keeping the capacity market “as a reduced backstorp.”
In the news release announcing the report, Mills stressed that PJM’s current situation is not sustainable and PJM and its stakeholders face a limited time to act. “Wholesale electricity markets are extraordinary institutions, and their most essential infrastructure is not a price curve or a performance obligation – it is legitimacy,” he wrote. “Generators, utilities, investors and consumers must all believe, at a basic level, that the rules are fair, stable and the product of a process they recognize as credible,” he wrote.
The outcomes are not entirely within PJM’s reach. The report notes that key players beyond PJM and its members include “state officials, the Federal Energy Regulatory Commission, consumers and the advocates who represent them.”
PJM was founded in 1927 as a loose pool among three investor-owned utilities in Pennsylvania, New Jersey, and Maryland to foster “economic dispatch,” sending out the least-cost power over the grid, regardless of the company that generated it. PJM expanded over the years.
As the U.S. electric system was restructured into a more competitive marketplace in the mid-1990s, PJM in 1997 became the first full-fledged, FERC-blessed regional transmission organization, featuring its bid-based capacity market. It now serves 13 states and the District of Columbia in the Eastern Interconnection, with some 67 million customers from Chicago to New Jersey.
Commenting on the PJM paper, veteran energy lawyer and analyst Abraham Silverman commented, “My initial take is that this document will be helpful in framing the decisions that have to be made — but PJM does not purport to lay out solutions. As PJM says, ‘This paper does not recommend a path. That is a deliberate choice, not a failure of resolve.’”
Former Republican FERC Chairman Mark Christie, now director of the Center for Energy Law and Policy at the William & Mary Law School, commented, “I have been advocating a frank reappraisal of the PJM capacity market for years. Glad that PJM management now agrees it is time to do it. There should be no pre-conditions or restrictions as to topics.”