Ohio Manufacturers Need Energy Stability – Not PJM’s Market Rollercoaster

Power lines leading into Cleveland, Ohio. Ohio’s manufacturing sector relies on affordable, reliable electricity – but current market dynamics are undermining these needs.

By Donald Larson, Vice Chairman – eGeneration Foundation

Ohio’s manufacturing sector is the backbone of our economy, and it runs on power. For factories and foundries, stable and affordable electricity is as critical as raw materials or skilled labor. Yet recently, the president of the Ohio Manufacturers’ Association, Ryan Augsburger, penned an op-ed urging Ohio to “stay the course” with PJM’s deregulated electricity markets. He asserted that competitive markets are delivering reliable, affordable energy and that calls for re-regulation are merely utilities seeking “guaranteed profit” at consumers’ expense. Nothing could be further from the truth. Augsburger’s narrative is fundamentally flawed and, ironically, antithetical to the long-term interests of Ohio manufacturers. Riding the rollercoaster of PJM’s volatile electricity market – a market effectively closed to outside competition by regulatory design – is not conducive to industrial planning or growth. In fact, a hard look at the evidence shows that returning to a more stable, regulated approach (or at least radically retooling our market participation) would better serve manufacturers and consumers alike.

PJM’s Volatile Markets: Hurting Manufacturers and Raising Costs

Augsburger paints a rosy picture of PJM’s capacity auctions and competitive pricing, but Ohio’s manufacturers have been living a far harsher reality. Instead of delivering stability, PJM’s market has produced wild price swings and uncertainty. The most glaring example is the recent explosion in capacity costs. In PJM’s 2024 auction, capacity prices “sent shockwaves” through the region – soaring from just $28.92/MW-day to $269.92/MW-day in one year. Certain zones saw astronomical peaks (over $440/MW-day in parts of Maryland and Virginia). This pushed total capacity costs from $2.2 billion to $14.7 billion virtually overnight. And it wasn’t a one-off: the following auction hit the price cap at $329/MW-day (only capped by an emergency measure) and climbed a further 22%, bringing the capacity bill to $16.1 billion. As one Ohio energy executive aptly put it, “It’s a mind-boggling, staggeringly incomprehensible number”. PJM itself admitted these record-high prices will drive electric bills up 1.5% to 5% for many customers. In Ohio, businesses face as much as a 29% hike in their electricity costs this year solely due to capacity charge increases.

Such whiplash-inducing price swings are devastating for manufacturers. Industrial firms operate on long planning horizons and tight margins. They build budgets and investment decisions around energy costs that ideally stay predictable. Instead, PJM’s market has given them year-to-year uncertainty – a “boom or bust” pricing that makes it nearly impossible to plan for growth. Imagine running an Ohio steel mill or auto parts factory: one year capacity is a minor cost, the next year it’s quadrupled. How do you confidently invest in new equipment or a plant expansion under that cloud of uncertainty? As Augsburger himself acknowledges, under deregulation “customers occasionally pay higher prices” to attract investment. But for manufacturers, these sudden spikes aren’t mere annoyances – they’re bottom-line killers.

Crucially, this volatility is a feature of the PJM market design, not an anomaly. PJM’s capacity auctions only secure power three years in advance; they are reactive by nature. When retirements or demand forecasts change, prices shoot up with little warning – exactly as we’ve seen. By PJM’s own admission, new generation cannot be built fast enough to respond to these short-term signals. In other words, the market can signal a supply shortage (via price spikes) but can’t actually fix it in time, creating a vicious cycle of high costs and reliability worries. Even FirstEnergy’s CEO (hardly a pro-regulation voice) warned that “the PJM construct is not going to fix the issue” of attracting needed power plants, calling the latest auction results “the canary in the coal mine” for our grid’s future.

Manufacturers require a far steadier and more proactive approach. The current setup effectively asks them to ride an energy cost rollercoaster, strapping their fortunes to a market that one year is dirt-cheap and the next threatens crisis. This is no way to run a grid for an industrial state. Under regulated utility planning, by contrast, capacity needs are identified and built before emergencies loom, and costs are averaged over decades – yielding gradual, predictable rate changes. That is the kind of forward-looking stability Ohio industry once had and desperately needs again.

High Prices and “Enron-omics” – Ohio’s Competitive Markets Have Failed

Not only is PJM’s market volatile, it’s also expensive in the long run. Augsburger claims Ohio’s competitive market is “delivering affordable energy” – but the facts say otherwise. Ohioans today pay more for power than they did under regulation, and more than residents of comparable regulated states. Before Ohio’s deregulation (1990–2004), our average residential electricity price hovered around 8.0¢ per kWh, with very little variation year to year. In the 15 years after deregulation (2005–2019), the average price jumped between 8.5¢ and 12.8¢ per kWh. In other words, prices not only trended upward, but became far more erratic – the “rollercoaster” in action. We can’t blame fuel costs for that volatility; in fact, fuel prices (natural gas, coal, even uranium) fell for much of that period. Instead, the market itself introduced new costs – from capacity charges, to marketers’ margins, to the integration of subsidized resources – that pushed Ohio’s rates higher despite cheaper fuel. Remember - fracking brought us record cheap natural gas - so why did our energy costs go up when natural gas prices plummeted? Well, what preceded our fracking revolution was Ohio's transition to PJM. How could one not question why Ohio has high energy costs compared to regulated states?

The broader evidence is even more damning. Across the country, deregulated electricity markets consistently have higher prices than regulated ones. On average, customers in states that deregulated supply pay about 32% more for electricity than those in regulated states. Ohio’s rates, while slightly better than the worst deregulated offenders, are still about 8% higher than the regulated-state average. It is telling that nearly all of the states with the cheapest power in the U.S. (North Dakota, Washington, Oklahoma, Tennessee, etc.) maintain regulated or hybrid systems. Oklahoma’s regulated utilities, for example, deliver electricity around 13¢/kWh for households (and far less for industry), versus 16+¢ in Ohio. Businesses notice these differences. Energy-intensive industries will gravitate to regions where power is cheaper and steadier, whether that’s a low-cost state like Oklahoma or Tennessee, or overseas to countries like Mexico or China. Augsburger’s OMA may content itself with comparisons against other PJM states, but Ohio’s real competitors for new manufacturing plants are outside the PJM footprint – places offering a better deal on energy.

It’s no coincidence that states like Tennessee (powered largely by the regulated TVA system) have enjoyed booming industrial growth and population gains, while Ohio’s growth has stagnated. From 2010 to 2020, Ohio’s population grew a meager 2.3%, lagging far behind Tennessee’s 8.9% growth in the same period. Companies like Volkswagen, Nissan, and Ford have invested heavily in new factories in Tennessee and other Southern states – decisions driven in part by electricity rates that rank among the nation’s lowest. Meanwhile, Ohio’s “competitive” market delivered such a bad deal to consumers that a recent Ohio State study found 72% of retail electricity offers over the past decade were more expensive than simply sticking with the default utility service. Three-quarters of the time, Ohio’s much-touted electric “choice” meant **paying more, not less. As the lead researcher observed, “no one can look at that and say, ‘Yes, that’s an efficient market.’”. Indeed, the only “winners” in this setup are the middlemen who take a cut, while businesses and households pay higher bills.

It wasn’t supposed to be this way. Deregulation was sold to Ohio in 1999 under Enron-inspired promises of innovation and savings. Instead, we got an “Enronomics” electricity market where traders and speculators profit without producing a single electron. Enron’s playbook was to turn electricity into a speculative commodity, removing government oversight and exploiting market loopholes to gouge consumers. We all remember how that ended – market manipulation, blackouts in California, and the collapse of Enron amid scandal. Ohio thankfully avoided the worst of the California-style crisis, but the legacy of that flawed model persists. As deregulation separated power generation from the regulated utility, it added layers of complexity and cost – new middlemen, brokers, and auction mechanisms that all take their toll. At the same time, no one is truly in charge of long-term grid planning. PJM’s markets prioritize short-term price signals over the long-term resource adequacy that customers actually demand. This is why Augsburger’s stance is so misguided: what good is a slightly lower price one year if it leads to a massive spike or a supply shortfall three years later? Manufacturers would gladly trade the illusion of “savings” in one billing cycle for certainty and reliability over decades.

Regulated States Invest for the Long Haul – Ohio Should Too

Perhaps the greatest harm of Ohio’s current path is how it discourages long-term investment in energy infrastructure. In his op-ed, Augsburger touts that deregulation attracted “over ten billion dollars” in new generation in Ohio. Yes, private developers did build a fleet of gas-fired power plants in the 2010s – chasing low natural gas prices. But where are the long-lived assets that will power Ohio in 2040 or 2050? They don’t exist in our current market. Investors shy away from capital-intensive projects like nuclear plants, advanced coal with carbon capture, because there’s no guarantee they’ll recover their costs over the decades such projects need. PJM’s markets, by design, favor generation with lower up-front costs and shorter lifespans – mainly natural gas plants that can be built relatively quickly. Anything that requires a 40- or 60-year investment horizon (say, a next-generation nuclear plant) is nearly impossible to finance without either subsidies or regulated long-term contracts. As a result, Ohio’s generation portfolio is becoming less diverse and overly reliant on natural gas, a fuel whose price and availability can swing with geopolitics and weather. The PJM market certainly didn’t save our two nuclear plants from the brink of closure – they survived only via a controversial subsidy, and one has since been slated to shut down despite Ohio’s heavy reliance on carbon-free power.

In contrast, regulated states and utilities routinely invest in long-term, robust infrastructure. Consider our neighbors in the TVA region (Tennessee and parts of the South): TVA just brought online a new nuclear reactor (Watts Bar Unit 2) after 40 years – a project only feasible in a regulated paradigm. Southern Company (a regulated utility in Georgia) is finishing two large new nuclear units (Plant Vogtle) to serve customers for the next 60+ years. Regulated utilities in states like Oklahoma have built modern natural gas combined-cycle plants and large wind farms, confident that they can rate-base those investments and deliver stable costs over time. This proactive build-out creates jobs, ensures reliability, and locks in affordable rates for the future. Meanwhile, Ohio sits on the sidelines, hoping that merchant generators will build what we need – but those generators instead focus on mergers and acquisitions, not new construction. Even PJM’s leadership now warns that plant retirements are outpacing new additions and the market isn’t keeping up with rising demand. Without a course correction, Ohio could face capacity shortfalls in a few years – a truly unacceptable scenario for a manufacturing-heavy state that must have 24/7 power.

The bottom line is clear: regulated or hybrid market states are beating Ohio on both price and investment. They deliberately plan for resource diversity and future growth, rather than assuming “the market will provide.” Ohio’s experiment with deregulation, kicked off by Enron-era ideology, has left us with higher average costs, a riskier grid, and an unhealthy dependence on a single fuel. That is no recipe for industrial success in the 21st century.

Charting a New Course: Re-regulation and Local Control for Ohio

It’s time for Ohio to acknowledge reality and pivot to a better energy strategy. We have several viable options to pursue, all far superior to clinging to the PJM status quo:

• Explore Exiting PJM and Creating an Ohio RTO: Ohio is not legally bound to PJM forever – PJM is a voluntary construct, and if it no longer serves Ohio’s interests, we can leave. States like Oklahoma and Texas operate their own grids or regional markets; even our neighbor Kentucky has largely avoided entanglement in RTOs. Ohio could withdraw from PJM and either join another regional transmission organization or form its own transmission & market authority focused on Ohio’s needs. An Ohio-centric RTO could be designed to prioritize reliability and low costs for our consumers, while still allowing open access to trade power as needed. At the very least, Ohio should assert more control by leveraging the Fixed Resource Requirement (FRR) option within PJM – essentially self-supplying capacity with our own resource decisions instead of PJM’s auction. Keeping our options open will force PJM to take Ohio’s concerns seriously.

• Re-regulate Generation or Pursue a Hybrid Model: Re-regulation isn’t a dirty word; it’s a return to common sense and intelligent grid design and investment. Ohio can restore the ability of our utilities to own generation assets or sign long-term contracts to build capacity. This doesn’t mean handing utilities blank checks – it means a transparent, regulated planning process to ensure we build sufficient, efficient power plants for the future, with oversight by state regulators. Ohio’s investor-owned utilities have already signaled they are ready to invest in new generation if allowed. We should take them up on it – with the proper consumer protections and competitive bidding for projects, of course. State lawmakers can craft legislation to authorize this on a limited basis initially, targeting critical needs (for example, new dispatchable generation or grid-scale batteries where capacity is tight). Re-regulation could be partial – e.g. maintain retail choice, but make bulk generation a regulated or hybrid market. The key is shifting from a passive market approach to an active planning approach. Yes, this would shift some risks back to consumers (as opponents like to point out), but consumers are already bearing huge risks and costs under the current model – just in an opaque way. At least with regulated resource decisions, Ohio can demand accountability and long-term least-cost planning. We did it successfully for decades, and we can do so again with modern tools and oversight. The payoff would be an end to the PJM capacity lottery and the assurance that Ohio will have adequate power at stable prices for years to come.

• Enable Behind-the-Meter (BTM) Power Purchase Agreements (PPAs): Another immediate step is to empower Ohio’s large energy users (and local utilities) to take control of their energy supply through behind-the-meter generation and direct power purchase agreements. In many regulated states, big manufacturers can partner with an independent power producer to build on-site generation (like a cogeneration plant or solar array) and purchase that power via a long-term contract, sidestepping the wholesale market. However, Ohio’s current policies and PJM rules often discourage this; they bind customers to the volatile market unless they leave utility service entirely. We should change that. Allow industrial and commercial users to develop on-site generation or microgrids with third-party developers, and let distribution utilities participate in such arrangements too. For example, an Ohio steel mill could host a gas turbine or small modular reactor at its facility, financed by a private developer, and lock in a 20-year fixed-rate PPA for that output. Similarly, an Electric Distribution Utility (EDU) – say, AEP Ohio – could enter a PPA with a new solar or battery project that is directly connected to its distribution network (essentially “behind” the bulk power meter), supplying local customers with resilient power at agreed prices. These behind-the-meter or self-supply options introduce real competition by allowing Ohio entities to bypass PJM’s costly auctions and contracts. They also enhance grid resilience by distributing generation. We should remove any legal or regulatory barriers to such arrangements. By embracing BTM PPAs and self-generation, Ohio’s manufacturers and communities can shield themselves from market turbulence and secure the reliable energy they need to expand.

Engineers monitor the PJM control room. Despite sophisticated markets, PJM’s recent capacity auctions saw record-high costs – surging from $2.2 billion to $14.7 billion in one year – a cost volatility that Ohio’s industry can no longer tolerate.

To be clear, none of these steps happens overnight, and each comes with challenges. But the alternative – doing nothing and trusting PJM’s markets – is far worse. If we stay the course Augsburger advocates, Ohio will see continued electricity price escalations, more panicked short-term fixes, and potentially serious reliability problems by late this decade. Manufacturers will either suffer higher costs or simply take their new investments to states with more sensible energy strategies. That is an unacceptable future for Ohio.

Conclusion: Putting Manufacturing First in Energy Policy

Ohio stands at an energy crossroads. On one side is the current path: a deregulated market regime born of 1990s Enron-era thinking, which has given us price volatility, higher long-term costs, and mounting uncertainty. On the other side is a return to principles that served our state well for decades – prudent regulation, long-term planning, and local control over critical infrastructure. As a voice for Ohio’s industrial and technological future, I can say with confidence that Ryan Augsburger’s advice to “stay the course” on PJM’s markets is dead wrong. It is not a recipe for innovation or competitiveness – it is a recipe for instability that undermines manufacturing.

Ohio’s manufacturers don’t need ideological lectures about free markets; we need electricity at reasonable and stable prices. We need a grid that we can count on to support new factories, expansions, and advanced technologies like electric arc furnaces or semiconductor fabs. That means thinking big and long-term: investing in a diverse mix of energy sources (including nuclear, natural gas, renewables, and storage) and not being afraid to direct that investment through policy when the market fails to do so. It means learning from regulated states that have maintained lower costs and attracted growth, instead of doubling down on a flawed deregulation experiment. And it means giving our businesses the freedom to secure their own energy solutions if the centralized market won’t provide them.

Mr. Augsburger wrote that Ohio’s competitive market has a “comfortable reserve margin of 18%” and thus we shouldn’t worry. But that margin is rapidly shrinking as plants retire, and even PJM warns of potential shortfalls in a few years. A true manufacturing advocate would be worrying night and day about how to ensure Ohio has 30% reserve margins in ten years – through new power plants actually being built, not just auction paper commitments. A true advocate would question why no one is building the next generation of power assets here without massive bribes or bailouts, and would champion a solution, not complacency. Ohio cannot afford complacency in energy policy, not if we want to remain an industrial powerhouse.

It’s time to put Ohio’s manufacturers and residents first. That means securing our energy future through sensible regulation, not wishing on markets. Let’s break free of this PJM rollercoaster and craft an electricity system that is boring in the best way – steady, affordable, and built to last. Our factories, our economy, and the people of Ohio deserve nothing less.

Sources:

1. Ryan Augsburger, “Stay the course on competitive electric markets,” Utility Dive (Opinion, Aug. 9, 2024) – Augsburger’s argument for PJM’s deregulated market.

2. Study for Romanchuk (2025) – In-depth analysis of Ohio’s deregulated vs. regulated outcomes, eGeneration Foundation.

3. Ethan Howland, “PJM capacity prices set another record with 22% jump,” Utility Dive (July 23, 2025) – Details on PJM’s recent capacity auction price spikes.

4. Gavin Bade, “Reregulation? How utilities and states are responding to PJM’s record capacity prices,” Utility Dive (Oct. 2024) – High capacity costs and state responses.

5. Toledo Regional Chamber of Commerce, “Watt’s-Up: Why Ohio’s Electricity Capacity Costs Are Rising June 1, 2025,” (May 13, 2025) – Explanation of capacity charge increases (up to 29% for businesses).

6. Ohio Capital Journal, “So-called electricity competition in Ohio is usually a bad deal for consumers, study shows,” (Jan. 8, 2025) – OSU study finding 72% of competitive offers cost more than default service.

7. U.S. EIA data – Average electricity prices: Ohio vs. regulated states (Oklahoma, Tennessee), and population growth (2010–2020) from U.S. Census.