Electricity costs are heading higher in many parts of the United States, and commercial and industrial energy buyers are feeling the impact. Rising demand, capacity constraints, fuel market uncertainty, and transmission challenges are pushing costs upward across major wholesale power markets. While the drivers vary by region, the result is the same. Organizations are facing greater budget pressure and more volatility than they have seen in years.
The trend is especially apparent in markets such as ERCOT, where extreme summer demand can trigger dramatic price spikes, and PJM, where recent capacity auctions have significantly increased future costs. In New England and New York, natural gas constraints, policy initiatives, and infrastructure investments continue to influence electricity pricing.
For businesses in Connecticut, Massachusetts, New York, New Jersey, Pennsylvania, Rhode Island, New Hampshire, Maine, Maryland, Illinois, and Texas, understanding these regional dynamics is becoming increasingly important. Organizations that wait until contract renewal often have fewer options and less pricing flexibility. Those that plan can position themselves to manage risk, improve budget certainty, and take advantage of strategic procurement opportunities.
This article explores the major forces shaping electricity prices in 2026 and outlines practical strategies buyers can use to protect their organizations from rising costs.
Understanding the forces behind rising electricity prices
Although each regional market operates differently, several common themes are driving higher electricity costs nationwide.
Demand growth remains one of the biggest factors. Expanding data center development, electrification initiatives, and economic growth are increasing electricity consumption faster than new generation resources are coming online. As reserve margins tighten, wholesale markets are becoming more sensitive to periods of high demand.
At the same time, capacity costs are increasing in several markets as grid operators seek to maintain reliability. Fuel price uncertainty continues to affect regions that depend heavily on natural gas generation, while transmission upgrades and policy-driven investments are adding new costs in others.
These pressures are already showing up in forward energy markets, auction results, and real-time pricing events. Understanding which factors matter most in each region can help organizations determine whether fixed-price contracts, indexed structures, or hybrid procurement strategies make the most sense.
ERCOT: Managing summer volatility in Texas
Texas continues to experience some of the most visible electricity market volatility in the country.
ERCOT expects peak electricity demand to surpass 91,500 MW in 2026, with several summer days potentially setting new records. During periods of extreme heat, real-time electricity prices can rise rapidly, creating substantial cost exposure for organizations on indexed products.
The challenge extends beyond day-to-day energy prices. Large commercial and industrial customers must also manage 4CP transmission charges, which are determined by electricity usage during the grid’s highest-demand hours.
For many Texas organizations, fixed-price contracts offer protection from commodity price spikes, while load management strategies can help reduce transmission-related costs. Demand response programs, battery storage, and dispatchable generation assets may also provide opportunities to lower overall expenses.
Perhaps most importantly, organizations should avoid allowing their entire portfolio to renew at the same time. Staggering contract expirations creates more flexibility and reduces the risk of locking all locations into unfavorable market conditions.
PJM: Capacity costs reshape the market
Businesses in Pennsylvania, New Jersey, Maryland, and Illinois are increasingly focused on one issue: capacity costs.
Recent PJM capacity auctions have produced some of the highest clearing prices in the market’s history. The 2026-2027 auction cleared at $329.17 per megawatt-day, representing a significant increase from previous years. Those costs are now flowing into customer bills through higher capacity charges.
The long-term outlook suggests continued pressure. PJM projects as much as 70 gigawatts of new demand by 2038, much of it tied to data center development. While new generation projects and demand response resources are entering the market, they have not yet matched the pace of load growth.
As a result, businesses may see rising electricity costs even during periods when wholesale energy prices appear relatively stable.
Organizations seeking budget stability should evaluate fixed-price contracts that incorporate current capacity expectations. Companies with operational flexibility may benefit from hybrid structures that allow participation in market opportunities while limiting downside risk. Regardless of contract type, reviewing renewal schedules and avoiding concentration around future auction cycles can help reduce exposure.
ISO-NE: Navigating winter risk in New England
In New England, natural gas remains one of the most important drivers of electricity pricing.
Limited gas infrastructure and strong winter heating demand continue to create volatility during cold-weather periods. These constraints can cause wholesale electricity prices to rise sharply, particularly during prolonged cold snaps.
Recent market data highlights the ongoing pressure. Wholesale electricity prices increased during 2026, and energy costs have remained elevated even outside the traditional winter risk period. For commercial customers, that translates into higher supply charges and less predictable budgeting.
Fixed-price contracts remain a popular strategy for organizations seeking protection from winter price spikes. Larger energy users often explore structured procurement approaches such as block-and-index strategies that provide a balance between cost protection and market participation.
Demand response programs can also create value by rewarding organizations that reduce consumption during critical grid events. When combined with a well-designed procurement strategy, these programs can help offset a portion of rising electricity costs.
NYISO: Policy and infrastructure shape New York pricing
New York presents a unique mix of market forces.
The state’s clean energy transition, transmission investments, and reliability requirements are reshaping electricity costs across the region. Commercial electricity rates already rank among the highest in the nation, and future infrastructure spending could add additional upward pressure.
Peak pricing remains a concern, particularly during summer heat waves when electricity demand rises sharply. New York City and Long Island continue to face some of the greatest reliability challenges, making those areas especially sensitive to supply constraints.
For commercial buyers, procurement decisions should account for more than commodity prices alone. Fixed-price contracts can provide protection against changing policy and infrastructure costs, while load management initiatives can help reduce exposure to expensive peak-demand periods.
Organizations with sustainability goals may also find opportunities to align renewable energy objectives with long-term procurement strategies that support cost management and risk reduction.
Procurement strategies that matter
While market conditions differ across regions, several procurement best practices apply almost everywhere.
The first step is understanding your portfolio. Organizations should map contract expiration dates, review load profiles, and identify locations with the greatest exposure to peak demand charges or capacity costs.
For core operations with limited flexibility, fixed-price contracts often provide the strongest budget protection. Facilities that can adjust operations during high-price periods may benefit from structured or hybrid approaches that allow selective participation in market opportunities.
Contract timing is equally important. Staggering renewals across multiple years can reduce concentration risk and create more opportunities to take advantage of favorable market conditions.
Organizations should also evaluate demand response programs, transmission charge management strategies, and scenario-based budget forecasting. Looking at multiple pricing outcomes can help leadership teams better understand potential risks and make more informed decisions.
The goal isn’t simply to find the lowest rate available today. It’s building a procurement strategy that supports operational objectives while reducing exposure to future market volatility.
How Kb3 Advisors helps organizations manage rising energy costs
As electricity markets become more complex, many organizations are looking for guidance that goes beyond simple rate comparisons.
Kb3 Advisors helps commercial and industrial energy buyers develop energy procurement strategies tailored to their specific risk profile, operating requirements, and geographic footprint. Our team monitors capacity auctions, wholesale market trends, weather-driven risks, and regional regulatory developments across ERCOT, PJM, ISO-NE, and NYISO.
We work with clients to build multi-year procurement roadmaps, stagger contract expirations, evaluate fixed and indexed pricing options, and identify opportunities to reduce transmission and capacity-related costs.
For organizations operating across multiple locations and multiple markets, that strategic approach can provide greater budget certainty while improving long-term purchasing decisions.
Now’s the time to act before volatility drives costs higher
The outlook for 2026 points to continued upward pressure on electricity prices across much of the country. While no one can predict exactly when the next heat wave, capacity auction, or market disruption will occur, the overall direction of pricing is becoming increasingly clear.
Organizations that wait until the last minute to address expiring contracts may face fewer choices and higher costs. Those that begin planning now have an opportunity to evaluate alternatives, manage risk, and create a more predictable energy budget.
If your organization has upcoming contract renewals or concerns about future electricity costs, now is the time to review your strategy. A proactive approach today can help protect your budget and reduce exposure to the uncertainty ahead.
Sources
- Short-Term Energy Outlook. eia.gov. Accessed August 31, 2026.
- 2026-2027 Base Residual Auction Report. pjm.com. Accessed August 31, 2026.
- Grid planning & electricity markets for a reliable, cleaner grid of the future. nyiso.com. Accessed August 31, 2026.
