Right Diagnosis, Wrong Prescription: CRA’s Case for Utility-Owned Generation
Jeff Plewes, et al., “Utility-Owned Generation as a Solution: An Analysis of Economic & Reliability Impacts of Increased State-Regulated Generation in PJM Delivery Year 2028/29,” Charles River Associates, Feb. 6, 2026. https://media.crai.com/wp-content/uploads/2026/02/06094149/Utility-Owned-Generation-as-a-Solution.pdf.
Introduction
A report by Charles River Associates (CRA) contributes to an active area of policy debate: Should states in the PJM region that have reformed electricity industry regulation to promote competition once again allow rate-regulated distribution utilities to build and own generation? Commissioned by Exelon, the report compares customer costs from a “Business as Usual” case to a modeled alternative that assumes an additional 22,000 megawatts (MW) of generating capacity. Based on CRA’s analysis, the added capacity would result in an estimated $9.6 billion net savings for PJM customers. The report concludes that the added resources would deliver substantial savings and reliability improvements.
What the Analysis Gets Right
The policy concerns explored in CRA’s report are reasonable. PJM’s two most recent capacity auctions cleared at administrative price caps, with the 2027/28 auction falling short of the grid operator’s reliability requirement for the first time. Meanwhile, natural gas generation additions have been modest in recent years—even as load forecasts have risen sharply. CRA compares the two cases for PJM’s delivery year, which runs June 2028–May 2029. Most of the projected customer savings arise because the assumed additional generation would keep PJM’s capacity auction price from being forced to the maximum allowable cap. The analysis projects additional customer savings as new, more efficient generation displaces older power plants in PJM’s energy market and produces lower energy prices. The estimated savings more than double to $20 billion under a higher capacity price cap (which would apply if the current price collar were allowed to expire). CRA’s analysis also identifies reliability benefits from the assumed generation additions.
What the Analysis Misses
The report intends to make a case for allowing rate-regulated distribution utilities to build electric generation; however, little in the analysis hinges on who owns the added power plants. CRA calls their alternative scenario “Planned Utility Resources,” but if it were labeled “Added Competitive Resources” instead—with 22,000 MW of additional generation built by private investors—the analysis would show similarly large price and reliability benefits.
This mismatch is the report’s core limitation: While the analysis focuses on the value of more generation, its policy conclusion centers on who should own it. The policy change for which Exelon is advocating would shift billions in investment risk from utility shareholders to captive ratepayers. The case for authorizing that shift deserves more scrutiny than CRA’s report provides.
Exelon’s corporate history provides critical context for evaluating utility investment in generation resources. Exelon owned one of the largest fleets of competitive generation in a non-utility subsidiary until its 2022 spinoff as Constellation. Nothing prevents Exelon from forming a new competitive generation subsidiary and building at shareholder risk right now, so seeking regulated cost recovery instead shows they find the downside risks too high.
Those market risks are substantial amid growing electricity demand. No one quite knows how much load growth will materialize over the next few years. CRA appropriately relied on PJM’s most recent load forecast, which reflects stricter vetting of data center commitments. The vetting has already reduced near-term peak demand projections, as PJM’s 2028 summer peak dropped by 4,400 MW from the prior estimate—two-thirds of the previously estimated shortfall. If continued scrutiny further reduces expected growth, the customer savings projected in CRA’s analysis would shrink or disappear.
The supply side of the market carries its own uncertainties, which CRA describes as policy uncertainty, supply-chain constraints, complex interconnection processes, long development timelines, and investment uncertainty. While these factors constitute real barriers to new power plant construction, every would-be developer (including regulated distribution utilities) faces those same barriers. Cost-of-service regulation does not make power plants easier to build; instead, it forces ratepayers to bear the cost when projects are late, over budget, or sized to demand that does not arrive as forecasted.
The analysis itself rests on an inherently biased comparison between an ideal utility scenario and the messy, imperfect status quo.
What’s Actually Needed Now
Policymakers concerned about keeping the lights on have better options than reversing two decades of electricity reform. PJM should continue to discipline demand forecasts by requiring more from prospective customers and utilities (including financial commitments from large loads) before including them in near-term projections—a reform already producing results. Permitting and interconnection processes should be streamlined. States should expand demand response and retail-side storage programs, whose economics have improved dramatically at current capacity prices. These targeted interventions address the actual barriers CRA identifies without shifting risk to ratepayers. States should also make it easier for large customers to arrange their own power supplies rather than adding their demand to the system.
Conclusion
At a time when load forecasts are especially uncertain, one of the worst things states can do is authorize long-lived, ratepayer-backed generation assets sized to a forecast that may not be realized. Policymakers who want reliable, affordable power should focus on removing barriers to investment rather than shifting investment risk from shareholders to captive ratepayers. The cost-of-service framework celebrated in the CRA report is the problem—not the solution.