---
title: 3.3.26 - Senate PUC Budget Hearing
description: Senate PUC budget hearing highlights rising electricity prices driven by regional capacity markets and surging power demand, with the state regulating only a portion of utility bills.
---

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# [3.3.26 - Senate PUC Budget Hearing](https://support.thedtfirm.com/dts-budget-blog/3.3.26-senate-puc-budget-hearing)

 Written by [The DT Firm](https://support.thedtfirm.com/dts-budget-blog/author/the-dt-firm) | Mar 3, 2026 10:13:34 PM

**Public Utility Commission – FY 2026–27 Budget**

**Hearing overview and framing**

The Senate Appropriations Committee convened a budget hearing with leadership from the **Pennsylvania Public Utility Commission (PUC)**, including **Chairman Stephen DeFrank, Vice Chair Kimberly Barrow, and Commissioner Kathryn Zerfus**. Commissioners were sworn in before testimony began.

Committee leadership noted that the **PUC’s roughly $105 million operating budget** is funded primarily through **assessments on regulated utility companies**, consisting of approximately:

The hearing focused largely on **electricity prices, PJM wholesale markets, capacity auctions, and rising power demand**, particularly from **data centers and electrification of the grid**.

**Major policy and budget topics discussed**

**1. How electricity is produced and delivered in Pennsylvania**

Committee members asked commissioners to explain how electricity reaches homes and businesses.

PUC officials described the system in three main stages:

**Generation**

Electricity in Pennsylvania is generated through the **PJM Interconnection wholesale electricity market**, which operates across multiple states. Generators bid into PJM markets to supply electricity in future years through **capacity auctions**, including the **Base Residual Auction**, which typically procures capacity **three years in advance**.

**Transmission**

Electricity then travels across **high-voltage transmission infrastructure**, which is regulated federally by the **Federal Energy Regulatory Commission (FERC)**.

**Distribution**

Finally, electricity flows through **local electric distribution companies** that deliver power to homes and businesses.

PUC commissioners emphasized that **Pennsylvania regulates only the distribution portion of the system**, while generation markets and transmission rates are governed primarily by federal oversight.

**Electricity pricing and regulatory authority**

**2. What the PUC regulates — and what it does not**

Members pressed commissioners to clarify what parts of electric bills the state can control.

The commission explained that:

The PUC directly regulates:

However, the commission **does not regulate electricity generation prices** because Pennsylvania is a **restructured electricity market** where generation operates competitively.

**PJM capacity auctions and rising electricity prices**

**3. Role of PJM and capacity market dynamics**

Much of the hearing focused on **PJM’s capacity auctions**, which determine payments to generators for maintaining available electricity supply.

PUC officials noted:

Officials attributed the price volatility to several factors:

Commissioners said PJM had historically maintained **very large reserve margins**, but those margins have now fallen to roughly **17–18%**, increasing system risk and price pressure.

**The PJM “price collar” and Shapiro administration actions**

**4. Governor’s FERC complaint and the capacity auction cap**

Lawmakers questioned the **price collar negotiated between PJM and Governor Shapiro’s administration**, which places limits on capacity auction prices.

Commissioners explained that the agreement established both:

for capacity auction outcomes.

Both recent auctions **cleared at the capped price**, meaning the price reached the upper limit allowed by the settlement.

PUC officials said PJM estimated the auctions **could have reached significantly higher prices without the cap**, which is why the administration has claimed the policy saved ratepayers money.

However, senators emphasized that while the cap may have prevented higher increases, **electricity bills still increased compared to the prior auction**.

**Debate over impacts of the PJM price collar**

**5. Concerns Pennsylvania may be subsidizing other states**

A significant exchange occurred regarding whether the PJM collar benefits some states more than others.

One senator argued that:

The senator suggested this dynamic could mean **Pennsylvania ratepayers are subsidizing electricity demand in other states**, particularly those with large data center clusters like **Northern Virginia**.

PUC officials acknowledged that the price collar changed relative price dynamics between regions but emphasized that without intervention the capacity price **could have risen toward $500 or higher**, making the cap necessary to protect consumers.

**Energy reliability and generation mix**

**6. Reliability of different energy sources**

Committee members also asked about the reliability of different energy resources.

PUC officials cited **Effective Load Carrying Capability (ELCC)** measures used by PJM to estimate reliability:

These figures reflect the percentage of capacity PJM considers dependable during peak demand periods.

**Renewable energy policy costs**

**7. Alternative Energy Portfolio Standard (AEPS) costs**

Members asked about the cost of Pennsylvania’s renewable energy requirements.

PUC officials testified that:

**Rate cases and consumer protections**

**8. Process for utility rate increases**

Lawmakers asked how utility companies increase distribution rates.

PUC officials explained:

Rate cases examine:

However, wholesale electricity supply costs are handled separately through **default service procurement processes**, not rate cases.

**Future grid challenges**

**9. Growing electricity demand from data centers**

Commissioners warned that electricity demand is rising at an unprecedented rate due to:

Historically, electricity demand in PJM grew **1–3% annually**, but new demand sources are now creating much steeper growth projections.

Officials said PJM is currently developing new market mechanisms—including **backstop auctions and faster generation interconnection processes**—to address the anticipated supply shortages.

**Key themes emerging from the hearing**

**Electricity affordability and reliability are becoming central policy concerns**

The hearing highlighted increasing concern among lawmakers about the **rapid rise in electricity prices**, particularly tied to PJM capacity auctions and growing demand.

**Regional power markets complicate state policy**

Several exchanges underscored the difficulty of regulating electricity prices when much of the market operates across **multi-state regional grids** governed by federal regulators.

**Demand growth from data centers is reshaping the energy system**

Multiple comments during the hearing suggested that **data center electricity demand may be one of the biggest drivers of future grid investment and pricing pressure**.

✅ **Key takeaway:**  
The hearing underscored that Pennsylvania’s rising electricity costs are being driven largely by **regional capacity markets and rapid growth in power demand**, while the state retains regulatory control over only a portion of the overall utility bill.

 

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