The Ledger Letter
Finance Studio Advisors · Sunday, September 20, 2026
 

The Grid Repriced Itself. The CPI Has Not Noticed.

The August inflation report put household electricity 3.8% above a year ago. The line actually fell 0.2% on the month. Now look at what power costs before it reaches a house. Wholesale power on the largest US grid averaged $136.53 a megawatt hour in the first quarter. A year earlier it was $77.78. Retail is a regulated pass through. It arrives late. The Fed is setting policy off the number that arrives late.
A Message From Our Partner
Dear Friend,
Every year, the power companies serving 13 states, from New Jersey to Illinois, place a bulk order for electricity to guarantee your lights stay on.
Last year, that order cost $2.2 billion.
This year: $14.7 billion.
Same lights. Same states. Nearly 7 times the price.
Guess who pays the difference.
Here's why it's happening: the biggest tech companies on Earth are spending a quarter of a trillion dollars this year on data centers, and they're draining the grid to run them.
There is one energy source built for exactly this: it runs 24 hours a day, needs no fuel, no sunlight, no wind, and Washington preserved its tax credits through 2033 while setting a termination date for everyone else's.
Google signed a 15-year contract. Bill Gates invested $100 million. And on October 20th, the government auctions a quarter-million acres of land that produces it, after the last auctions went for 206 times the asking price.
One company has spent sixty years building this industry.
"The Buck Stops Here,"
Kelly Maguire
Behind the Markets
 
The Breakdown
Today's disagreement: wholesale power has repriced by three quarters in a year; the index that guides policy shows under four percent.
 
01
The Inflation Print Looked Friendly
August core CPI rose 2.4% from a year ago, the softest core reading since March 2021. Headline held at 3.4%. Household electricity fell 0.2% on the month and sits 3.8% above last year. Read that page alone and power looks contained.
02
The Wholesale Market Disagrees
PJM wholesale power averaged $136.53 per megawatt hour in the first quarter against $77.78 a year earlier. Its capacity auction cleared at $329.17 per megawatt day, the federal cap. Two auctions before that, the same clearing price was $28.92.
03
The Bill Arrives by Permission
A regulator sets retail rates. The gap between $28.92 and $329.17 is already contracted for delivery. It reaches households through rate cases over several years. The index records the approval date.
By the Numbers
PJM Wholesale Power, Q1$136.53/MWh vs $77.78
Electricity, CPIUp 3.8% over 12 months
Core CPIUp 2.4%, softest since 2021
10-Year Treasury5.004%, above 5%
S&P 5007,650.50, Friday close
Power data per PJM and Bloomberg. Inflation data per the Bureau of Labor Statistics, August 2026. Market levels are Friday, September 18, 2026, per CNBC.

The Cost That Has Not Arrived Yet

The Report Everyone Read on Thursday

Most of the weekend commentary will call August a good print. Core at 2.4% is the softest since March 2021. Gasoline did the damage, up 27.4% over the year and responsible for more than a third of the monthly rise. Electricity barely moved. Stocks took the reading well and closed the week with the Nasdaq up 0.7%.

Now Look at the Wholesale Tape

PJM runs the largest wholesale power market in the country. Its first quarter average came in at $136.53 per megawatt hour, against $77.78 the year before. The forward capacity auction cleared at $329.17 per megawatt day. That is the federal price cap, and it applied across the whole footprint. Two auctions earlier the number was $28.92. The market monitor attributed most of the jump to data center load. None of that sits inside the 3.8%.

Regulated Prices Arrive Late

Here is the mechanism. A household pays a tariff, and a tariff changes when a state commission approves a rate case. The wholesale cost is contracted years ahead and recovered from customers later through riders and base rates. So the CPI electricity line follows the regulator's calendar rather than the market's. The EIA already expects retail electricity to outpace general inflation through this year.

What This Does to a Rate Path

The Fed raised to 3.75% and 4.00% on Wednesday. Futures put roughly a 55% chance on another move October 28. Those decisions read the same index that shows electricity at 3.8%. If the wholesale number reaches household bills over the next two years, it lands as inflation after the tightening is finished. Watch two things. The September CPI on October 14, for the electricity line. And the long end, where the thirty year sits at 5.336% and already prices something the front end does not.
The grid contracted these costs years ago. The index will report them years late. Policy is set on the index.

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