PJM Interconnection's capacity auction cleared at $329.17 per megawatt-day for the 2026-2027 delivery year, up from $28.92 just two delivery years earlier - a roughly tenfold increase that reflects how tight the region's supply margin has become. Wholesale power prices on PJM averaged $136.53 per megawatt-hour in Q1 2026, up 76% from $77.78 a year earlier, with independent market monitor Monitoring Analytics attributing 63% of that increase to data center load. For a power generator that fails to deliver committed power during a grid emergency and must buy replacement power on the open market, these are the prices they are buying into. That is the balance sheet exposure the insurance market is currently underwriting on static surveys - and SAMP Risk, the insurtech subsidiary of Asset Performance Partners, is arguing it needs to change.
Two emergency orders issued by the US Department of Energy over the July 4th weekend authorized PJM - the largest power grid in the country - to curtail data centers and waive power plant pollution limits as a severe heat wave pushed forecast demand toward an all-time record. PJM had projected peak loads of approximately 159,563 megawatts on July 1 and approximately 162,860 megawatts on July 2, prompting the Department of Energy to declare a statutory emergency under Section 202(c) of the Federal Power Act.
The emergency crystallised a specific and growing underwriting problem. Extreme heat events are creating a growing risk of power generation and backup plants being called to generate on an emergency basis. When a plant fails in those circumstances, the generator becomes liable for buying replacement power at open market prices - prices that, as the PJM data shows, have increased roughly tenfold in two years driven substantially by data center demand growth. A static survey conducted before that structural shift cannot capture the replacement power cost exposure that now exists.
For power generators the financial exposure runs in two directions. Plants miss out on significant revenue during high-demand, low-supply periods when they cannot increase output or experience a failure. More seriously, if a plant cannot deliver committed power to the grid it must buy replacement power at prices that can spike dramatically during a grid emergency - a liability generators currently carry largely on their own balance sheets or transfer only partially into the insurance market through business interruption and capacity cover.
That exposure is compounded by a supply-side dynamic that extreme heat creates simultaneously. Higher temperatures typically bring lower wind speeds, reducing output from wind farms, while conventional power plants become less efficient in extreme heat - a simultaneous demand surge and supply reduction that makes emergency conditions more likely and replacement power costs more severe when they occur.
Alistair Moodie, chief product officer at SAMP Risk, said the July 4th weekend was a preview of a risk the power industry and its insurers need to take seriously across markets. "In the UK for example, as heatwaves become more frequent, the National Energy System Operator will be looking at how other operators manage extreme summer loads and at the tools available to them, including formally declaring an emergency to bring more generation capacity online," he said.
Moodie's proposed response is connected insurance using telematics data from the site to give operators and insurers a live view of asset performance. "Problems are caught before they become losses, and risk is priced on real operating conditions rather than assumptions," he said. "This is a real and growing balance sheet risk for power generation businesses, and one the insurance market has an opportunity to respond to properly, through connected insurance."
The gap between what static survey underwriting assumes and what PJM's capacity market now prices is the specific mismatch SAMP Risk is describing. Until power insurers move to dynamic pricing models that reflect live operating conditions, that gap widens every time the grid declares an emergency.
