FRANK LASEE: Take And Pay: Why Your Electric Bill Keeps Climbing And How To Fix It
Many of us are wondering why our electric bill feels like it’s on a rocket to the moon? The way electricity is bought and sold in the U.S. is broken, and it’s hitting our wallets hard. Let’s break it down in a way that…
Many of us are wondering why our electric bill feels like it’s on a rocket to the moon? The way electricity is bought and sold in the U.S. is broken, and it’s hitting our wallets hard. Let’s break it down in a way that makes sense, even if you’ve never thought about how your power gets to your home.
Big organizations like PJM, bringing electricity to 67 million in 13 Eastern states, and MISO, serving 46 million people in 15 Midwest states, decide which power plants—coal, gas, nuclear, wind turbines, or solar panels—send electricity to your lights, fridge, and TV.
They also decide how much those plants get paid. The way they do it is anything but fair.
These grid managers use a system called “pay-as-clear” or “take-and-pay.” Imagine you’re hiring painters for your house. Each painter bids a price, and you pick the cheapest ones. Then you pay all of them the highest bid you take, even if it was way more than the others. That’s what’s happening with our electricity.
Every power plant that gets picked is paid the highest accepted bid, no matter how low they offered to sell their electricity. Like overpaying for a job, just because one guy bid a crazy high price. Like when peaker plants are needed. Peaker plants only come on an average of 2,000 hours a year or less and charge very high prices. Without wind and solar we would need less peaker plants.
This system is driving up our electric bills. In 2024, PJM’s costs jumped tenfold from $28.92 per megawatt-day to $269.92, totaling $14.7 billion. Why? Three big reasons: huge new demand from data centers (think Microsoft and Google), the addition of part-time wind and solar, and the early shutdown of reliable coal and gas plants.
These shutdowns happen because of wind and solar and Obama/Biden regulations. Backed by taxpayer subsidies, they bid low and get picked first, even though they’re not reliable. Wind provides electricity 32% of the time, and solar just 20%. We need coal, gas, and nuclear to keep the lights on all the time.
Here’s the problem: We can’t count wind and solar to work when we need electricity most, like during heatwaves, stormy nights, or freezing winter storms. Because they bid low, they push out the reliable plants. Which then have to charge more to cover their costs since they’re selling less power.