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ERC Analysis: Retail Electricity Price Trends

April 8, 2015 By Josh Kessler

The Energy Research Council (ERC) provides weekly retail electricity price benchmark data for Retail Energy Buyer. Last week’s newsletter presented an overview of how to interpret these benchmarks. In addition, ERC is providing an original analysis of both short- and long-term benchmark price trends.

Short-Term Price Benchmark Trends

The trends discussed below are based on an analysis of data presented in ERC’s benchmark price charts. Refer to the charts for greater detail on benchmark price movements.

  • Ohio has seen the sharpest dropoff of any deregulated state over the past month, with a 4.33 percent decline in electricity benchmark prices, and a 2.74 percent decline over the past week.
  • Price benchmarks fell throughout much of the country, with Massachusetts, Illinois, Texas, Maryland and the District of Columbia each experiencing monthly declines of over 1 percent in the past month. Only Rhode Island, Illinois and New York saw monthly price increases of at least 1 percent, while most other states experienced minor monthly declines.
  • Benchmark prices at the end of last week also show a decline from prices last week and last month in Ohio, Texas and to a lesser extent in Pennsylvania.
  • Overall, the price benchmarks are somewhat stable compared to the average rate of decline seen in recent months, which signals that prices appear to be stabilizing, with minor fluctuations from week to week at the state level.
  • Looking at the table of price benchmark by contract term, 24 month have more favorable pricing than either 12- or 36-month prices in every state except Texas, where shorter-term (12-month) contracts have the lowest price benchmark. (Rhode Island is excluded because not enough suppliers reported 12- and 24-month prices to include in this data set.)

Longer-Term Electricity Price Trends

Nationally, retail electricity prices for commercial customers have been trending downward since peaking last April. Prices have stabilized at two support points, one between April and July, and the other between June and December. In contrast, sharp declines occurred in the April-May timeframe and again in the December-January timeframe. It now appears we are entering another period of price stabilization with a support point somewhere above $0.0700 kWh. The question is how long this period will last and whether we will see even lower prices going forward. As seen in the chart below, the current national average price benchmark for retail electricity is approximately $0.0070 to $0.0090 per kWh (10%) lower than the same time last year.

LT Elec Benchmark Prices

The drivers behind these price trends include:

  • Warmer weather, which is suppressing electricity and gas demand.
  • Low natural gas prices, which may be bottoming out.
  • Increased demand for natural gas, driven by the power and industrial sectors.
  • High gas storage inventories.
  • Low wholesale gas prices.

In future weeks, ERC may provide additional insight into these long-range trends, as well as exploring regional issues driving retail energy markets.

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