PJM's Own CEO Says the Wholesale Electricity Market Is Broken. Here Is What That Means.

The domestic policy debate has sharpened around a specific structural question: not whether the grid is under pressure, but why the wholesale markets that govern it are actively making things worse.

The Market Was Built for a Different Grid

In the late 1990s and early 2000s, Regional Transmission Organizations took over wholesale electricity markets from vertically integrated utilities. The stated logic was straightforward: introduce competition, prices fall, reliability improves. According to Frank Lasee, writing for the Daily Signal, it partly worked — but this design no longer fits.

The original model rested on three assumptions: demand growing 1–2% annually, fully dispatchable generators, and real-time price signals sufficient to balance supply. None of those assumptions holds today.

Demand is surging from data centers, AI infrastructure, electric vehicles, and manufacturing reshoring. Some regions are seeing load growth rates not recorded since the period following World War II, according to Lasee. Meanwhile, the generation fleet has shifted heavily toward wind and solar, which cannot be dispatched on command.

The Capacity Payment Problem

The structural flaw is specific. Under current market rules, a wind farm that generates power only when weather permits collects the same capacity payments as a gas plant that can ramp up within minutes. The market does not differentiate firm capacity — power you can reliably dispatch on command — from intermittent generation that shows up only when conditions allow.

That distinction matters enormously on a cold Tuesday evening at 6 p.m. when demand peaks and the wind is calm.

Adding to the distortion: under uniform clearing-price rules, all generators receive the highest accepted bid. Resources carrying federal tax credits and state mandates can bid below their true cost of production, according to Lasee. That drowns out the price signals that would otherwise attract investment in firm, dispatchable capacity. The market rewards participation, not reliability.

PJM's CEO Said It Plainly

PJM is the largest grid operator in the United States, managing electricity for roughly 65 million people across 13 states. Its chief executive has publicly stated, according to Lasee's account, that what worked for two decades no longer works. The organization running the market is acknowledging the market is broken and cannot fix the problem under existing rules.

The Strongest Counterargument

A fair version of the opposing view deserves a direct hearing. Supporters of the current RTO structure argue that wholesale competition has delivered lower average prices than the regulated utility monopolies it replaced. They point out that wind and solar's low marginal cost genuinely does reduce clearing prices for consumers in the short run. And they argue that targeted reforms — better capacity accreditation, improved demand response, updated interconnection standards — can fix the structural issues without dismantling competitive markets or handing power back to vertically integrated utilities.

The reform debate is genuinely contested on the specifics, even if the diagnosis — the grid faces a reliability problem — is not.

What Actually Needs to Change

The technical fix being discussed is a capacity market redesign that assigns different credit values to firm dispatchable capacity versus intermittent resources. According to Lasee, the Free Enterprise Electricity reform package would require net true-cost bidding that strips subsidies from market bids, pay-as-bid pricing that ends uniform clearing-price windfalls, and capacity valuation tied to actual firm availability.

The political obstacle is that any reform reducing capacity payments to wind and solar projects also reduces the value of the federal subsidies — tax credits and mandates — that those projects were built to capture.

Energy Secretary Chris Wright, photographed at a site visit in Idaho Falls on June 25, 2026, has been publicly pressing for a reliability-first framing on grid policy. Utilities and generators profiting under current rules will call reform too complicated, disruptive, and risky — the same arguments once made against airline, trucking, and natural gas deregulation, which ultimately proved wrong and delivered lower prices and better service, according to Lasee.

The PJM CEO is right: what worked for two decades no longer works. The question, as Lasee frames it, is whether states and legislators will demand a market structure that actually does.