PECO’s Push to Combat the Rising Costs of Keeping the Lights on

It’s a familiar summer scene: Dad stalking through the house, flipping off light switches, lowering shades, and grumbling about the electric bill. But these days, small changes may not significantly reduce electric bills. “Our Pennsylvania Public Utility Commission chair, Stephen DeFrank, likes to say that the cheapest unit of energy is the unit of energy not consumed, and we definitely agree with that,” Tom Bonner, PECO’s Director of Policy, Advocacy, and External Affairs, said. “That’s why we offer many incentives through our energy efficiency programs — but that only goes so far.”

Consumers across the country are learning that despite their best efforts, rising energy costs are, to some extent, beyond their control. “The cost of energy … has gone up by $28 a month for our average residential customer since 2024. And I think that’s a lot of the pain people are feeling,” Bonner said. After about two decades of flat growth in electricity usage, consumption soared nationwide in 2023, largely due to commercial demands like data centers. For PECO, the surge in electricity costs has become a call for broader market reform. Now, the utility is pushing an “all-of-the-above” approach to energy affordability aimed at shielding customers from rising costs in the present and creating a market structure that can support enough power supply for the long term.

The cost of reliability

To understand why monthly bills are rising, it can help to unpack what actually goes into the prices on those bills. Electricity may seem simple from the customer’s side: Power is generated somewhere, then carried through wires to your house. But at the grid level, electricity is bought and sold through a complex wholesale market involving energy generators, transmission companies, and local utilities, like PECO, which handle the last leg of the journey: the distribution of power to homes and businesses. While PECO delivers electricity, it cannot, by law, generate it.

The prices PECO passes along to its customers from the grid level are heavily influenced by PJM Interconnection, the regional transmission organization (RTO) that operates the wholesale markets that help determine electricity costs and supply across 13 states, including Pennsylvania, and the District of Columbia. Each year, PJM runs capacity auctions that secure commitments from power plants and other generators to be available during periods of peak demand, like heat waves or cold snaps. These auctions set capacity prices, the amount utilities like PECO will pay energy generators for promised energy availability, up to three years in advance.

One challenge posed by this three-year planning window is that electricity demand can change dramatically during that time. The rapid rise of generative AI, for instance, has accelerated the construction of massive data centers, each of which can span more than four football fields and draw 100 megawatts of power, roughly enough electricity to serve 80,000 homes at once. While some of these facilities can generate their own power through on-site turbines or solar panels, they still connect to the public grid to access a reliable power supply. This requires increased capacity costs and higher generation prices, which ultimately are passed on to customers.

Further, PJM’s three-year planning window is simply too short for generators to bring new supply online to meet increased demand. And this has been happening at the same time as older power generation units are nearing the end of their service life and retiring, while new natural gas generators and renewable energy projects are delayed either in the construction phase or in PJM’s interconnection queue, the process by which new generators are connected to the grid. “It’s taking a minimum of five years to get a new baseload plant — the workhorses of the electric system — built,” Bonner said. Developers are reluctant to break ground without confidence that future demand and market prices will justify the cost. “Power plants are billion-dollar investments and they’ve historically taken 25 to 40 years for the people that build them to recover their costs,” said Bonner.

The dwindling supply has created a considerable bottleneck in meeting the region’s power needs and has driven up capacity prices. Since 2023, PJM auctions have reported a series of record-high capacity prices, a pattern that is driving costs across the region. “So you have the capacity prices going up, but in the near term, it’s not translating into new power plants,” said Bonner. While PECO does not control this activity, addressing that bottleneck is central to protecting customers from rising costs and planning for the power supply the region will need in the future.

“The cost of energy … has gone up by $28 a month for our average residential customer since 2024. And I think that’s a lot of the pain people are feeling.”

PECO’s call for reform

Without coordinated action across the region, customers could face persistent price increases and potential rotating power outages during peak demand periods. In response, PECO has introduced its “all-of-the-above” approach to energy affordability, a call to reform the system through a comprehensive and wide-ranging set of strategies that demand active engagement across policy, innovation, and infrastructure to build a resilient energy future for Pennsylvania.

To address the bottleneck caused by PJM’s capacity markets, PECO is pushing for structural changes that will provide better long-term price signals and incentivize new generation investments. And to combat the surge in demand from new data centers, PECO is engaging large users, including data center developers, in “Transmission Security Agreements,” contracts designed to ensure, among other things, that consumers don’t get stuck with the bill for grid upgrades if the developer never builds the data center. Instead, data centers and large energy users will pay their fair share of grid upgrade costs.

“Another thing we look at,” Bonner said, “is reforming the retail markets.” These are the consumer markets that were intended to bring down electricity prices through competition, by allowing customers to select their power supplier. In practice, however, these contracts start at competitive introductory rates that grow increasingly expensive after the rate expires. While less than 20% of PECO’s customers took advantage of the open market in 2025, they paid $115 million more than they would have with the utility’s default service. “[The default service] is where we buy power in bulk and resell it at no markup,” Bonner said. To combat these predatory contracts, PECO is advocating for two bills, HB 2131 and SB 312, that were recently introduced in the Pennsylvania House and Senate. They focus on reforming the retail market by restricting suppliers from enrolling customers in contracts that offer introductory rates and then spike once the term expires. These initiatives could help address rising costs in the present, but they aren’t enough. PECO also aims to protect our energy future.

Policies that will affect the future

PECO’s “all-of-the-above” approach to energy affordability also looks beyond immediate bill relief to the region’s long-term energy resiliency through policy advocacy and structural changes. One focus is expanding access to renewable energy through policy reforms and investments that make it easier and cheaper for customers to connect to solar power.

HB 504 in the Pennsylvania House and SB 504 in the Senate would expand access to renewable energy, including solar and renewable natural gas, by enabling community energy projects and allowing customers to opt in to solar power without leaving the default PECO service plan. Because community solar projects can be built at greater scale, they can lower the cost of participation and bring benefits to customers more quickly. “What they could do under these community solar bills is say, ‘I want 20% of my energy to come from this solar plant that can be built at larger scale, lower unit cost, and then have that [reflected in] my PECO supply charge,’” Bonner said. That model could be especially helpful for customers in apartment buildings or with shaded rooftops who can’t invest in their own solar production.

To clear some runway for these investments, PECO is advocating for modernization and the reform of Act 129, a 2008 Pennsylvania law that requires electric utilities to run energy efficiency programs and hit targets for reductions in electricity use. HB 505, which PECO supports, would give utilities more flexibility to direct a larger share of program dollars toward low-income customers. Taken as a whole, these reforms would provide consumers with more options for managing their budgets while also supporting environmental goals and energy resiliency. Currently, the state requires utility companies like PECO to help customers save a quota of electricity over five years. If they miss that goal, the utility faces significant penalties of up to $20 million, according to Bonner. “What it says to us as a utility is: Play it safe. Find the cheapest energy efficiency that is out there; make sure you meet the mandate.” That means that utilities aren’t taking big efficiency swings or investing in longer-lasting improvements that would provide a greater benefit overall.

The reform proposed by Governor Josh Shapiro would give utilities a compliance “safe harbor” as long as they can show they ran their programs responsibly, freeing them to take on harder, higher-impact work without fear of a penalty for falling short. Additionally, Bonner said it would “let [PECO] focus more of the [resources] on people who are facing affordability challenges — our low- and moderate-income customers — and make more long-term investments that will have longer-term benefits.”

Near-term support

Some solutions are already here for those who need them. As utilities, policymakers, and watchdog groups work through solutions to the region’s future energy security, PECO has developed programs designed to assist customers in managing the rising energy costs that they face today. “There are some customer-specific opportunities to save,” Bonner said. For instance, budget billing can help keep monthly bills more predictable, trading slightly higher costs during mild months for protection against summer and winter spikes. Time-of-use rates, meanwhile, may help customers save by shifting energy use to lower-cost hours.

For communities that needed urgent assistance, direct resources were available through PECO’s Customer Relief Fund. Over the past year, this $12.5 million fund reached more than 9,000 customers in Southeastern Pennsylvania. The program closed after available funds were fully allocated due to strong customer demand. PECO also offers flexible payment options, energy efficiency programs, and connections to state and federal assistance to help make energy more affordable for customers.

As technology and market conditions continue evolving at an accelerated pace, it’s clear that the forces driving up energy costs are bigger than any household habit. Any solution will require utilities, generators, and policymakers to act together, Bonner said, and PECO sees its role as helping move those negotiations forward. “We have ideas on things that can help, and we believe that we can help start the conversations that need to be had.”