New Jersey lawmakers pushed back on the state’s all-electricity, clean-energy strategy at a heated committee hearing March 28, urging an all-the-above approach as PJM faced criticism for failing to foresee a dramatic hike in demand that helped trigger a 20% rise in the average customer’s bill.
Facing predictions that electricity demand could rise by more than 60% by 2050, driven in part by the expected arrival of data centers, greater electric vehicle use and the state’s shift toward building electrification, lawmakers said the state needs to consider all options that could rapidly boost generation capacity. (See NJ Releases Electrification-focused Energy Master Plan.)
The turbulent, five-hour meeting convened by a Select Committee of Senators and the Assembly Telecommunications and Utilities Committee underscored the severity of the potential power shortfall facing New Jersey and its likely impact in further pushing up rates.
The two Democratic co-chairs of the meeting suggested that the state needs to look beyond Gov. Phil Murphy’s (D) tight focus on renewable energy. During his seven years in office, Murphy has championed EVs, building electrification and a now largely stalled effort to create an offshore wind sector able to generate at least 11 GW.
“The storms are going to keep coming, and we need to look at renewable energies,” said Sen. Paul Sarlo (D), one of the co-chairs. “But we can’t just sit idle for the next five to seven years and not open our eyes to other concepts.”
That was the “loud and clear” message of the committee members, he said. He asked Christine Guhl-Sadovy, president of the New Jersey Board of Public Utilities (BPU) and a Murphy appointee, if her agency would agree to “go forward with repurposing an existing plan for clean natural gas” while also pursuing renewable energy. Under prodding, she replied only that “we need to explore all options.”
Assemblymember Wayne DeAngelo (D), the second co-chair, said the state needs a “well diversified energy generation portfolio” that includes wind, battery storage, nuclear and natural gas. Plans to go from gas heating to heat pumps will require a major, potentially burdensome residential infrastructure upgrade, he said.
“Seventy-five percent of our homes in New Jersey are heated with natural gas. Sixty-five percent of our businesses are heated with natural gas,” he said. “And we haven’t even talked about our data centers, which are popping up all over the place.”
Republicans, who have long called for the state to adopt a broader portfolio, blamed Murphy’s policies for the state’s dilemma.
“I can’t help but get the impression today that we’re here because all of a sudden the rates went up, and people are like, ‘Wow!’ … like it wasn’t foreseen or couldn’t have been predicted,” Sen. Anthony M. Bucco (R) said. “Experts have said the same thing: that we’re just not going to be able to produce enough [electricity]. … We’ve all been saying that; you can’t completely electrify the state in such a short period of time.”
PJM Criticized for Perceived Flaws
But some of the most vigorous criticism was directed at PJM and its capacity market. In written testimony delivered at the hearing, Brian O. Lipman, director of New Jersey’s Division of Rate Counsel, said that “clearly PJM is the easiest target in the room, and not without reason.”
“PJM and its markets are a significant factor as to how we got to this problem,” he said. “Everyone saw the pending retirements of generators. The issue did not come to a head because PJM was able to mask the problem with excessive available generation. The system is broken. The capacity auctions are not doing their job. The generation queue is not doing its job.”
Legislators convened the hearing to address concerns about a 17 to 20% hike in the average electricity bill that will begin June 1 as a result of a basic generation service (BSG) auction in February.
Those BSG bid prices were shaped by PJM’s capacity market auction in July, which set capacity prices at record levels, about 10 times as high as the previous auction. The auction sets the wholesale prices in the region that help shape bids in the BPU’s auction. (See PJM Capacity Prices Spike 10-fold in 2025/26 Auction.)
BPU officials say they believe the bids were inflated by PJM demand forecasts that failed to properly include all the clean capacity expected to come online.
In a March 25 letter to PJM discussed at the hearing, Guhl-Sadovy said the BPU had “serious concerns” about PJM’s plan to reduce the “recognized capacity value of generation resources” in its upcoming auction because it used the same “flawed reliability modeling” that produced the high prices. She said PJM’s Independent Market Monitor calculated that the prices would have been half as high if not for those “flaws” that “severely undercounted available supply.”
“The cost of PJM’s mistakes to New Jersey consumers in the July 2024 capacity auction alone will be at least $800 million,” Guhl-Sadovy wrote. “PJM should therefore be working to ensure that no critical flaws remain in its capacity market design.”
Calculating Generator Capacity
PJM says the pending supply shortage is in part because of decarbonization efforts that have shut down older, fossil fuel-fired plants faster than new plants have come online. The RTO has long faced criticism about the slow pace of approvals for new generating sources, in particular renewables, although it says its new queue system will speed up the process.
Asim Haque, senior vice president for PJM, disputed the suggestion that the RTO should have anticipated the “major uptick in demand.” For years demand across the system was flat, but that changed recently because of data centers, electrification and onshoring of the U.S. manufacturing industry.
“The market is essentially holding a mirror and reflecting the reality of the supply-demand challenge,” he said. “And unfortunately, consumers are now seeing that on the bill side.
“If we’re all being very truthful with one another, nobody saw this coming,” he said. “We certainly saw the supply-demand imbalance sort of changing many years ago … but the demand increase, in particular, this uptick, is something that is a newer phenomenon.”
Addressing criticism of the RTO’s rules, Haque said PJM is constantly receiving stakeholder input, but it can’t change them without FERC approval.
One complication in trying to calculate supply is the variable output of some clean resources. A group of solar resources totaling 200,000 MW of capacity, for example, only results in about 20,000 MW of actual power because PJM calculates they only operate at about 10% of capacity, he said.
New Jersey’s Picture
In New Jersey, which imports 35% of its electricity, the RTO is predicting demand will increase by 2.8 to 4.7% over the next 10 years, Haque said. The state planned to meet that increase in large part through wind generation: Of the state’s 16,000 MW in PJM’s queue, about 12,000 MW are OSW, he said. “As we sit here right now, those projects have not materialized.”
Guhl-Sadovy said New Jersey has 79 projects in the PJM queue, mainly solar and storage that are “waiting for interconnection review to get connected to provide electricity.” She said clean energy projects could be among the fastest to start generating energy once approved, adding that the federal government disrupted that process by halting wind projects.
“The fact of the matter is that thousands of megawatts of generation were going to come online in New Jersey to support New Jersey and the PJM grid between 2029 and 2032,” she said.
Under questioning, Guhl-Sadovy acknowledged that her agency suspects that one reason for the RTO’s slow approval process of clean energy projects is that “PJM has made decisions that lean towards fossil fuel generation and the states that have large-scale fossil fuel generation.”
Data Center Reality?
Sen. Bob Smith (D) questioned the veracity of the claim that power-hungry data centers are driving the power imbalance. He said the U.S. Energy Information Administration has reported that the state’s electric load dropped from 75.4 TW to 71.1 TW in 2023.
“You mentioned the projected increase: Our history has not been out-of-the-box demand in New Jersey, but actually, at least recently, declining demand,” he said to Guhl-Sadovy. “Do you actually have data center AI in the queue at BPU? … How do we know any of this is true?”
He said PJM does not know if the proposed AI data centers are “real or phony-baloney” and called for the RTO’s policies to be investigated, saying the specter of data center demand is a “preemptive rate increase with no basis in fact.”
Guhl-Sadovy said the question is a “great point,” adding that the utilities have said they have interconnection requests from data centers and her agency is waiting for details.
Haque acknowledged that on the demand side, the industry is “legitimately struggling with sort of what is real on these data center forecasts.” One solution already adopted by some states is to put “gating criteria” on data centers that submit connection applications, requiring them to “put money down up front,” he said.
