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.
Fuel costs are 25-40% of their cost of producing — when we need it — electricity. The other 60-75% are fixed costs, like capital, maintenance, and workers. When they sell less, they charge more. This is a prescription for ever higher electricity rates as we add more wind and solar.
Germany, Denmark, and the U.K. have rates more than double our national average because they have lots of wind and solar. The more we add, the higher our prices. The take-and-pay system makes it even worse.
Wind and solar aren’t as “green” as advertised. Building wind turbines and solar panels uses coal-powered steel and diesel-powered mining, often in factories in China that run on coal. Plus, they need gas plants as backups when the weather doesn’t cooperate, adding more costs.
Calling on demand coal and natural gas backups for wind and solar is like calling a full-time pitcher a backup for a pitcher that can only pitch when the wind blows or the sun shines. It is a misleading use of the English language that serves China and the wind and solar industrial complex.
There’s a better way: switch to a “pay-as-bid” system. In this setup, every power plant gets paid what they actually bid, not the highest price. It’s like paying each painter what they quoted, not what you pay for the most expensive one. This will force wind and solar to compete fairly.
If they bid too high, they will not get picked, which is how competition should work. Experts estimate this could save electricity customers hundreds of billions of dollars by keeping prices down and ensuring reliable power.
Sure, some power companies might try to game the system by bidding high, but competition and anti-gouging regulations will keep them in check. Unlike now, where they’re cashing in while your bill skyrockets.
The push for massively subsidized wind and solar is making our costs worse, not better. It’s time for grid managers and the Federal Energy Regulatory Commission (FERC) to ditch this unfair system.
A pay-as-bid approach prioritizes affordability and reliability, keeping our lights on without emptying our wallets. We deserve a power system that works for us, not against us.
Frank Lasee is the president of Truth in Energy and Climate and a former Wisconsin state senator.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of the Daily Caller News Foundation.
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