PJM Capacity Price Cap Extended to December 2026 Auction: Why Suppliers Price Differently

Cap and floor through December 2026

PJM's capacity price cap and floor extend through the December 2026 Base Residual Auction, which sets prices for the 2029/30 delivery year [esaipower-cap-schedule]. The collar limits how high or low the Reliability Pricing Model auction can clear [pjm-rpm-overview].

After the July 14, 2026 auction cleared the 2028/29 delivery year at $325 per MW-day for the third straight year [pjm-2028-29-auction], suppliers update how they embed capacity in fixed quotes. The extended collar tells them the next auction is also bounded [esaipower-cap-schedule].

How the collar works

Mechanism	Effect
Price cap	Auction cannot clear above the FERC-approved maximum [pjm-rpm-overview]
Price floor	Auction cannot clear below the FERC-approved minimum [pjm-rpm-overview]
Extended through Dec 2026	2029/30 auction uses same collar [esaipower-cap-schedule]

When demand for capacity exceeds supply at the cap price, the auction clears at the cap [pjm-2028-29-auction]. That happened three consecutive years through the July 2026 auction [pjm-2028-29-auction]. Suppliers pricing fixed contracts assume cap-level capacity cost until the collar changes.

Why suppliers price capacity differently now

Three cap clears change supplier behavior [pjm-2028-29-auction]:

Fixed contracts with capacity included: Suppliers embed cap-level RPM cost because they expect the December 2026 auction to clear at or near the cap [esaipower-cap-schedule]. Quotes look expensive upfront but protect against a hypothetical uncapped spike.

Fixed contracts with capacity pass-through: Initial quote looks cheaper. Monthly invoices adjust when each delivery year's capacity price takes effect [pjm-rpm-overview]. The July 2028/29 result hits pass-through customers June 2028 [pjm-2028-29-auction].

Block-and-index hybrids: A base block includes estimated capacity. Incremental load above the block floats at index plus capacity pass-through [pjm-rpm-overview].

Cannabis cultivators with low load factor and high PLC pay more capacity per kWh under all three structures. The contract type determines when the cost appears, not whether it appears.

Auction calendar: what each date sets

Auction date	Delivery year	Effective date
Dec 2025	2027/28	June 1, 2027 [esaipower-cap-schedule]
July 14, 2026	2028/29	June 1, 2028 [pjm-2028-29-auction]
Dec 2026	2029/30	June 1, 2029 [esaipower-cap-schedule]

If you renew a 36-month contract in January 2027, you may cross three capacity delivery years before expiration. Each June 1 reset can change your pass-through line [esaipower-cap-schedule].

Worked example: fixed vs pass-through over three years

Assume a 500 kW facility (0.5 MW PLC) with 2.2 million kWh annual use. Illustration only.

Capacity cost at $325/MW-day [pjm-2028-29-auction]:

0.5 MW × $325 × 365 = $59,313 per year = 2.69 ¢/kWh at 2.2M kWh.

| Contract type | Year 1 supply quote | Year 2 (Jun 2028) | Year 3 (Jun 2029) | | --- | --- | --- | | Fixed, capacity included | 10.5 ¢/kWh all-in | Same | Same until renewal | | Fixed, capacity pass-through | 8.0 ¢/kWh + pass-through | +2.69 ¢ capacity step | +Dec 2026 auction rate | | Index | Floats monthly | Floats | Floats |

The fixed-included contract looked expensive at signing but did not surprise you in June 2028. The pass-through contract looked cheaper until the capacity line stepped up [pjm-2028-29-auction].

Reading capacity language in your contract

Look for these phrases in supply agreements [pjm-rpm-overview]:

• "Capacity included" or "fully bundled": Supplier absorbs RPM changes until renewal.
• "Capacity pass-through" or "RPM adjustment": Monthly or quarterly true-up to auction clearing price.
• "Change in law" or "regulatory change": May allow supplier to pass collar modifications.
• "Material change in usage": Dropping load after closing a room may trigger repricing.

See contract fine print for evergreen and termination rules.

December 2026 auction: what to expect

The December 2026 auction sets 2029/30 capacity under the extended collar [esaipower-cap-schedule]. If the 6,831 MW shortfall from the July 2026 auction persists or widens [pjm-2028-29-auction], another cap clear is likely [pjm-rpm-overview].

Operators signing long-term contracts in late 2026 should ask suppliers:

1. Which delivery years' capacity are included in the fixed price?
2. What happens at renewal if the cap rises in a future FERC order?
3. Is PLC based on your actual peak or a ratcheted value?
4. Does the quote assume cap-clear or a lower simulation?

Cultivation-specific considerations

Indoor grows have stable, high PLC relative to kWh compared to office buildings. Capacity is a larger share of supply cost [pjm-2028-29-auction]. Three years at the cap disproportionately affect cultivation economics versus low-demand retail.

Demand response enrollment can offset part of the capacity line for participants [pjm-rpm-overview]. Peak shaving reduces PLC for future delivery years. Neither eliminates capacity cost entirely under current market design.

Connecting to your current bill

The 2026/27 capacity price ($329.17/MW-day) already hit bills June 1, 2026 [pjm-rpm-overview]. See PJM $329/MW-day analysis. The July 2028/29 result is the next major step [pjm-2028-29-auction]. The December 2026 auction prices the year after that [esaipower-cap-schedule].

Plan contract renewals on a June 1 calendar aligned with PJM delivery years, not calendar years.

See fixed vs variable rate FAQ and fixed vs index contracts.

Floor price: the downside collar

The cap gets headlines because three auctions cleared there [pjm-2028-29-auction]. The floor matters when new generation enters and surplus capacity pushes clearing prices down [pjm-rpm-overview]. Pass-through customers benefit from floor-level clears. Fixed-contract customers who prepaid cap-level capacity do not automatically get refunds unless the contract says so [esaipower-cap-schedule].

Read renewal terms carefully if the December 2026 auction clears below the cap for 2029/30 [esaipower-cap-schedule].

Evergreen clauses and capacity renewal traps

Contracts with evergreen auto-renewal may roll you into a new term at prevailing capacity prices without renegotiation [esaipower-cap-schedule]. If your evergreen renewal date falls in spring 2028, you may auto-renew into cap-level 2028/29 capacity before you compare the market [pjm-2028-29-auction].

Send 60-day notice if your contract allows opt-out before auto-renewal. Re-shop with explicit capacity inclusion terms tied to the delivery year you are entering.

December auction and the three-year-forward return

The December 2026 auction for the 2029/2030 delivery year continues the FERC-approved price collar [esaipower-cap-schedule]. Suppliers pricing 36-month contracts today may embed assumptions about that clearing price. Read pass-through clauses that adjust if the December auction differs from the July 2028/29 result.

What happens if the December auction clears at the floor

The collar has a floor as well as a cap [pjm-rpm-overview]. If new generation enters and surplus capacity pushes the December 2026 auction for 2029/30 below the cap, pass-through customers benefit from lower capacity charges starting June 2029 [esaipower-cap-schedule]. Fixed-contract customers who prepaid cap-level capacity may not receive automatic refunds unless the contract specifies downward adjustment [pjm-rpm-overview].

Read renewal terms before signing a fixed all-in rate in late 2026 [esaipower-cap-schedule]. Ask whether capacity is trued down if the December auction clears below the July 2028/29 cap result [pjm-2028-29-auction].

FERC collar mechanics and future changes

FERC approves the maximum and minimum RPM clearing prices [pjm-rpm-overview]. The extended collar through December 2026 is published on PJM auction schedules [esaipower-cap-schedule]. A future FERC order could raise the cap, lower the floor, or change the collar period [pjm-rpm-overview]. Supplier contracts with "change in law" clauses may pass collar modifications through even during a fixed price term [pjm-rpm-overview].

Cannabis operators signing thirty-six month contracts in January 2027 cross three capacity delivery years before expiration [esaipower-cap-schedule]. Each June 1 reset can change pass-through capacity if the contract does not bundle all three years [pjm-2028-29-auction].

Supplier margin under repeated cap clears

Three consecutive cap clears signal suppliers that capacity cost is baseline, not tail risk [pjm-2028-29-auction]. Margins embedded in fixed quotes may rise because suppliers no longer hedge against sub-cap outcomes [pjm-rpm-overview]. Request line-item breakdowns showing energy, capacity, transmission, and supplier margin separately [esaipower-cap-schedule].

Compare at least three supplier proposals with identical capacity inclusion terms before the December 2026 auction sets 2029/30 prices [esaipower-cap-schedule]. See PJM 2028/29 auction analysis for the capacity cost already locked for June 2028 [pjm-2028-29-auction].

Evergreen renewal before December 2026 auction

Contracts with auto-renewal clauses may roll into a new term at prevailing capacity prices without renegotiation [esaipower-cap-schedule]. If your evergreen date falls in November 2026, you may renew into 2029/30 capacity pricing before comparing the market [pjm-2028-29-auction]. Send opt-out notice per contract terms if your agreement allows cancellation before auto-renewal [pjm-rpm-overview].

Cultivation load factor and capacity cents per kWh

High PLC with moderate kWh produces high capacity adders per kWh [pjm-2028-29-auction]. A 600 kW facility using 2.0 million kWh annually pays roughly 3.6 cents per kWh in capacity at $325 per MW-day [pjm-2028-29-auction]. The same peak at 2.8 million kWh drops the adder to 2.5 cents per kWh [pjm-rpm-overview]. Efficiency that adds kWh without adding peak kW improves load factor and lowers capacity cost per unit of production [enel-pjm-2026-27-auction].

The December 2026 auction sets 2029/30 delivery year prices under the same collar extended through that date [esaipower-cap-schedule]. Cultivators signing thirty-six month contracts in late 2026 cross the 2028/29 and 2029/30 capacity resets before expiration [pjm-2028-29-auction]. Ask each supplier which delivery years are bundled in the fixed price and which will pass through at the December auction result [pjm-rpm-overview].