FERC just released its 2025 State of the Markets report. I spent years at FERC leading the team that compiled and presented it before the commissioners, so I read it closely every year.
The wholesale headlines get most of the attention. PJM Western Hub electricity prices up 47% year over year. Both PJM capacity auctions cleared at the price cap. Over 7,000 miles of new transmission entered service nationally. Data center capacity hit 50 GW, with 31% concentrated in PJM alone.
Those are important numbers. But if you work in community solar or distributed generation project finance, the question that matters is different. How do those costs actually land on a residential bill?
The actual BGE residential rate in 2025 was $191/MWh. A flat 3% escalator applied to the 2020 rate would have projected $133/MWh. That is a $58 gap in five years.
What drove each component
The supply rate nearly doubled in five years, driven by wholesale market conditions that moved faster than anyone modeling a flat escalator would have projected. The SOTM confirms the structural drivers: rising gas prices across all major hubs, PJM peak load growing 4.8% year over year, and capacity costs that went from historically low to price-cap levels in a single auction cycle.
Transmission costs on BGE bills doubled over this same period. PJM added over a thousand circuit miles of new transmission in 2025 alone, and transmission now represents nearly a third of PJM's all-in wholesale costs, up from about a quarter a few years ago. Those capital costs get recovered through riders on residential bills. BGE's Rider 1 went from roughly $10/MWh in 2020 to over $20/MWh in 2025.
Distribution costs climbed steadily through PSC-approved rate cases and grid modernization spending. Quiet, relentless, and largely invisible in a blended escalator.
Why a flat escalator cannot represent this
A residential rate is not one thing. It is a stack of components that move for different reasons on different timelines through different regulatory and market mechanisms. Supply is wholesale market driven. Transmission is infrastructure investment driven. Distribution is rate case driven. A flat percentage cannot represent three different stories happening simultaneously.
The December 2025 PJM Base Residual Auction cleared at the price cap, with total capacity costs exceeding $16 billion, up from $2.2 billion the prior year. An 8x increase in one auction cycle. That cost flows through to BGE, Pepco, and PSE&G residential bills via capacity riders. A flat escalator captures none of this.
What this means for project underwriting
If you are underwriting a community solar project with a 20 or 25 year term, the rate assumption you lock in at closing compounds for the life of the deal. Getting the direction right is not enough. You need to get the components right, and each one moves on its own logic.
A retail rate forecast is not an escalator applied to a total. It is a component model.