ASSEMBLY BUDGET COMMITTEE

STATEMENT TO

ASSEMBLY, No. 5902

STATE OF NEW JERSEY

DATED:  JUNE 27, 2025

      The Assembly Budget Committee reports favorably Assembly Bill No. 5902.

      As reported, this bill requires the Board of Public Utilities (board) to work collaboratively with neighboring states to research and recommend collective action to:  (1) require any electric load serving entity in New Jersey to demonstrate to the board that it has contracted for at least 80 percent of the capacity needed to serve its load on a bilateral basis for at least five years into the future; (2) withdraw from PJM Interconnection, L.L.C.’s (PJM) capacity market and either develop a multi-state compact to engage in the fixed resource requirement alternative to secure electric capacity through contracts with private entities, competitive capacity auctions, or some combination thereof, or (3) withdraw from the regional, high-voltage electric transmission grid operated by or managed by PJM and either establish an independent electric transmission grid or join an existing electric transmission grid.

      PJM’s capacity market operates through competitive auctions to procure capacity for future delivery years.  However, issues with PJM’s interconnection process have delayed new energy generation, which reduces competition.  Backlogs to PJM’s interconnection queue undermine one of the goals of the capacity auction, which is to incentivize developers to bring more generation to the electrical grid.

      Further, the Organization of PJM States, Inc., of which the New Jersey Board of Public Utilities is a member, and the Independent Market Monitor for PJM have found flaws in the PJM capacity market, which they claim have led to capacity auction clearing prices that fail to reflect supply and demand.

      In July 2024, PJM’s capacity auction for the 2025/2026 Delivery Year had clearing prices almost 10 times the prices from the previous auction.  The increase in capacity clearing prices will result in $14.7 billion in costs to consumers, up from $2.2 billion from the prior delivery year.  This result represents the highest capacity prices in the history of PJM’s capacity auction.

      PJM’s actions are resulting in increased costs and decreased affordability for ratepayers.  And, PJM has not adequately addressed concerns about the impact of rate increases on ratepayers or been responsive to State energy policies.  The Legislature therefore determines that it is in the best interest of the residents of New Jersey to work in collaboration with other states to explore alternative options to PJM’s capacity auction for securing the capacity necessary for grid reliability.

FISCAL IMPACT:

      Fiscal information for this bill is currently unavailable.