Ryan Augsburger is president of The Ohio Manufacturers’ Association.
The recent PJM capacity auction for the 2025-2026 period has contributed to the debate over the future of Ohio's restructured energy landscape. Some stakeholders, particularly investor-owned utility companies, argue that the auction results portend a shortfall in energy capacity to the region, necessitating re-regulation and subsidies for building new generation facilities.
This narrative is fundamentally flawed.
The PJM capacity auction is a critical mechanism that ensures reliability in the electric grid. By securing commitments from power generators to deliver electricity when needed, it safeguards against potential shortages. The recent auction results have demonstrated not a shortfall, but rather a comfortable reserve margin of 18%, well above the amount required to maintain grid reliability. This surplus capacity is a clear indicator that the market is functioning as intended, providing a cushion that not only ensures reliability but also fosters competition and innovation.
The narrative pushed by certain public investor-owned utilities — that this auction outcome somehow signals a need for re-regulation — is misleading. These companies are using the specter of a non-existent energy shortfall to argue for a return to monopoly power generation where utilities can secure guaranteed returns on the backs of captive customers.
Such a move would undermine the functional competitive generation market that has attracted over ten billion dollars in new generation investments in Ohio alone over the past decade, replacing uneconomic generation units along the way. The reality is that the current market structure, characterized by competition and market-based pricing, is delivering reliable and affordable energy to Ohioans.
While customers occasionally pay higher electricity prices to attract this competitive investment, competitive power generators stand to lose money if they don't earn customers' purchases. In contrast, the call for re-regulation is more about rewarding utility owners and executives with guaranteed profit at the expense of consumers and the broader economy.
Furthermore, the argument for re-regulation and subsidies is fundamentally at odds with the principles of a free market. Subsidizing new-generation facilities distorts the market, leading to inefficiencies and potentially higher costs for consumers. It discourages competition and innovation, as companies become reliant on government support rather than striving to improve their operations and reduce costs. In contrast, a competitive market encourages efficiency, innovation and cost-effectiveness, benefiting consumers and the economy as a whole.
The PJM capacity auction's results are a testament to the success of Ohio’s deregulated energy market. The reserve capacity not only ensures that there is no immediate threat to the reliability of the grid but also provides a strong foundation for future growth and innovation. The market is sending clear signals to independent energy producers that there is a demand for new generation capacity, and they are well equipped to meet this demand.
Be wary of the claims of a looming energy shortfall serving as a mask for re-regulation and a monopolistic energy market. While PJM needs to make significant reforms to its interconnection process and auction process, its capacity auction still demonstrates that Ohio has a healthy reserve margin, providing ample capacity to meet future energy needs.
Ohio's energy future is bright, driven by a competitive market that encourages innovation, efficiency and affordability. Let us continue to support a free and fair market, where independent energy producers can thrive and deliver the reliable, affordable energy that Ohioans deserve.
