For all the drama in the spot market, last week’s more telling move came in the forward curve as Monday’s day-ahead cash drifted back to roughly $31, PJM Western Hub forwards took into account what transpired during the mini-heat wave and what might lie ahead with the confidence in an El Nino summer escalating as we fast approach Q3-2026.

The prompt July contract climbed +$3.54 on the day to $107.45, August added +$2.35 to $86.55, and every month from June through next January closed higher. That divergence - cash cooling while the curve bids - is the signal worth reading: the forward market is pricing a tighter summer than this mild stretch suggests, with July and August carrying the steepest premium.

 It wasn’t fuel, it was tightness

A mid-week heat event pushed West Hub Day-ahead on-peak to $215.63 on Thursday before it collapsed to $35.58 as temperatures fell about 15°F. Gas never moved — Henry Hub stayed anchored near $3.10 the whole time. So the entire spike lived in the implied heat rate, which blew out to roughly 79 and now sits near 16.

Plainly: the heat rate is what the market pays for power above the cost of the gas to make it. When it explodes while fuel sits still, you’re watching the grid run out of cheap supply — not run out of fuel. It took only a brief, unremarkable heat day to manufacture a $200 print.

Figure 1 | PJM West Hub On-Peak Day-Ahead LMP and Implied Heat Rate

Uptick in Q3 rational, not reactive.

That fragility is structural. Across five summers, PJM’s June heavy-load demand has climbed from about 105 GW to 110 GW — with 2024–26 the three highest on record. Meanwhile the firm, dispatchable middle of the stack has thinned: coal’s share of June generation roughly halved, from about 25% to 15%, displaced by gas on the margin and a solar fleet that has grown more than five-fold.

The cushion is simply thinner, and the evening ramp now leans harder on gas peakers as solar fades at sundown. The same — or even cooler — conditions are producing bigger spikes than they used to. That margin compression is exactly what the forward market is paying to hedge.

Figure 2 | Rising Load, Coal and Solar Market Share

The setup is loading, not fading.

Near term, demand is forecast to rebuild from about 97 GW toward 114 GW midweek before easing back to the 104–107 GW range — still below last week’s peak, but warming right back into the prompt-July window the curve just bid up. The front of the curve is about to get its first real test of the summer.

Figure 3 | PJM RTO Load – Actual and Forecast

The indicators that would confirm the curve’s lean: load pushing toward the ~130 GW area; the implied heat rate (not the gas strip) doing the work; wind lulls landing inside the heat; and the western, ComEd and NJ–Eastern zones, where congestion widens basis first. That’s the scoreboard.

If you would like to track the action in the East, including PJM, reach out to Energy GPS via our Contact Us form on the website or email us at [email protected] for more information regarding our Market Analytics Enterprise Product Offering.

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