Is the competitive power market model broken?

US electricity prices are rising at well above the general rate of inflation. The data center investment boom, by adding to electricity demand, points to further upward pressure in the future. Consumers are feeling the strain, and they want politicians and regulators to do something about it. One proposed solution is that the rules around competitive power markets need radical reform. In this episode, the Energy Gang looks at PJM, the largest power market in the US, and debates a possible way to add to electricity supplies without pushing bills even higher.

Host Ed Crooks and regular contributor Amy Myers Jaffe of NYU are joined by Carim Khouzami, Executive Vice President for Transmission and Development at Exelon, one of the largest US utility groups. Carim explains why the landscape of the US power industry has changed fundamentally over the past five years: electricity demand is rising at a pace the sector has not seen in decades, driven by data centres, electrification, and broader economic growth. And that demand surge is colliding with an electricity system that was designed for a very different era.

Competitive markets such as PJM were meant to bring down costs for consumers and send the right signals to the industry for new investment. But Carim argues that in many markets, those signals are no longer working as intended. Customers are seeing higher bills and the reliability of the system is under threat. Reserve margins are getting tighter, and the industry is struggling to bring new generation online quickly enough.

PJM offers one of the clearest examples of how those tensions are playing out. The region is grappling with soaring demand, especially from data centres, while trying to manage affordability and reliability at the same time. Carim, Amy and Ed explore why PJM has raised concerns with among state governors, federal regulators and the White House. And they explain why its challenges echo similar problems elsewhere.

The central issue is about the market structures that will be best able to meet those challenges in the future. How can the next wave of infrastructure can be built in ways that support both the reliability and the affordability of electricity supplies? Carim makes the case that regulated utilities such as Exelon, which are often prevented by state rules from owning generation capacity, should be allowed to run their own power plants.

His proposal opens up a wider debate about the future of power markets and electricity systems generally. There is plenty of evidence that competitive markets have delivered benefits for consumers. But can they meet the needs of the new world of AI-driven demand growth? And if not, is utility ownership of power plants the right solution? Amy highlights the risks of overbuilding new power plants, and asks whether alternative solutions such as batteries are being given a fair chance to compete.

Carim defends his proposal as the best way to secure reliability and value for customers. The current model is not working, he says, and reform is now the best option. PJM, as it has operated until now, may not be ready for the demands that AI, electrification and the energy transition are about to place on it. Politicians and regulators across the US and around the world will be watching to see how it responds.

This episode of Energy Gang is brought to you by ENGIE, the smarter energy supplier. ENGIE doesn't just provide the power to run your business — they supply the energy to move it forward, with reliable, flexible solutions built for what's next. Learn more at engieresources.com.