After a year of debate over market reform, electricity costs, and whether gigascale data centers can be reliable demand response participants, it should be no surprise that the cost of grid congestion in the U.S. is enormous.
According to a report out this week from Grid Strategies, grid congestion costs exceeded $17 billion in 2025 — a significant jump over 2024’s total of $12 billion.
It’s part of a trend that’s been coming over the last five years: average annual congestion costs between 2016 and 2021 were roughly $9.2 billion. Between 2021 and 2025, that number almost doubled.
The factors behind 2025’s massive congestion costs are largely the same reasons electricity bills have gone up in recent years: failure to build enough new transmission, extreme weather (and especially last year’s extremely hot summer), and high natural gas prices, which widen the gap between low- and high-cost areas on the grid.
Among RTOs, PJM shouldered the highest costs, with $3.2 billion in congestion costs, followed by ERCOT, which reported $2.5 billion in costs.
ERCOT in particular provides a clear example of what happens when limited capacity prevents generation from being delivered to demand centers, the report explained: Texas’ Panhandle region has abundant low-cost generation in the form of wind, but is export-constrained. The Permian Basin region, where costs increased 27% year over year, has seen massive demand growth thanks to data centers and oil and gas activity, but is import constrained.
PJM, meanwhile, saw its congestion costs rise thanks in large part to record demand during summer heat waves. Transmission lines couldn’t move enough cheap power from western suppliers to big cities on the East Coast, forcing grid operators to turn on expensive local power plants out of merit order, and driving July congestion costs alone to $608.9 million. The region is already grappling with high prices, massive data center load growth, and opposition to already-planned transmission projects.
Meanwhile, in MISO, high natural gas prices caused the total price of electricity to jump 67%, pushing overall congestion costs up 23%. The region also experienced simultaneous generation and transmission outages, which accounted for 28% of its congestion increase year-over-year. Widespread tornadoes and high winds, for example, collided with planned outages causing emergency power cuts across parts of the central U.S. in April, causing congestion costs in MISON to total $10 million in a single day that month.
The West, where most of the region is without an RTO, has long accounted for the bulk of congestion costs in the country, and that continues to be the case. However, because of the lack of transparent market data, it’s challenging to directly measure the costs. Grid Strategies estimates them by taking known costs from official energy markets, and scaling them based on the West’s share of total national power demand.
Building interregional transmission is hard across the country — as evidenced by the massive congestion costs — but is particularly challenging in the West. Projects can take two or three times as long as they do in other parts of the country, due in part to the region’s vast tracts of federal land that trigger permitting reviews by an alphabet soup of government agencies, as well as the fact the region has no central grid planner, and only California has an ISO.
Looking ahead
Ultimately, the only thing that will really bring down congestion prices is more capacity on the system, either through building new high-capacity lines, or getting more out of existing infrastructure via advanced technologies or battery storage. And there’s some momentum on that front across the country — though it’s likely to take a while.
Grid Strategies points to ERCOT’s massive “Strategic Transmission Expansion Plan,” approved in December 2025, which features several thousand miles of 765-kilovolt lines designed to carry cheap power from the Panhandle to the Permian Basin. Those lines are expected to come online in the early 2030s.
There’s also been a lot of activity in SPP. In August, FERC approved the RTO’s proposal to use topology optimization — a grid-enhancing technology that uses software to reroute power around congested lines. A similar program in MISO saved that RTO $95 million in the first half of the year.
SPP also completed its expansion into the Western Interconnection this past spring, adding nine load-serving utilities across seven states — Arizona, Colorado, Montana, Nebraska, New Mexico, Utah, and Wyoming — into SPP’s footprint. It gives SPP oversight of the new balancing authority area and its wholesale market, as well as a broader role in regional transmission planning and congestion pricing. It should improve the management and visibility of congestion inside SPP West, but it won’t immediately solve congestion.
The physical transmission connection between SPP’s two regions is currently capped at just 310 MW, meaning the new Western footprint can’t draw large volumes of cheap power from the East when supply is tight.
But over time, more granular, transparent congestion prices, plus a more regional planning process that evaluates transmission benefits across the newly-added utilities, will give grid planners and regulators more data to help justify interregional transmission lines, the report said. Once those lines are built, congestion prices will eventually, finally decline.
