ERC: Electricity Price Trends for the Week Ending July 24
Short-Term Price Benchmark* Trends
The average price benchmark for Power ($/kWh) virtually treaded water last week, declining by only 0.17 percent from the week before. The big exception to this was Illinois where the benchmark price rose a substantial 3.14 percent week-over-week. Other states that experienced a meaningful movement in power prices last week include Connecticut (-2.08 percent) and Ohio (-1.58 percent), along with the District of Columbia (+1.02) and Maryland (+1.00).
Last week, longer term 36-month contracts had favorable pricing in Washington DC, Maryland, New York, Ohio and Pennsylvania. In addition, 48-month contracts were favorably priced in Illinois.
Based on NOAA’s most recent short-term forecast, temperatures are projected to be in the normal range, with longer-range projections indicating moderate temperatures continuing over the next several weeks. If the current forecasts prevail, projected injections into inventory will be modestly below last year for the same timeframe and around normal or the five-year average for the same weeks. This will result in the year over year surplus narrowing, while the surplus versus the five-year average will likely holding steady.
Jim Moore, PhD, is president of the Energy Research Council. ERC manages a portfolio of primary research programs and databases that evaluate energy prices, procurement practices and management strategies.
Jim has been CEO of several research companies including TDC, a subsidiary of International Thomson; Highline Financial, a Thomson-Reuters company; and Mentis Corporation, which was acquired by Gartner Group. He has also served as executive director of The Global Futures Forum, an international think tank, and as managing director of Gartner Group’s Global Financial Services practice.
*The weekly average price benchmarks are derived from a standardized database of daily matrix prices issued by many electricity suppliers. The database is updated every business day and includes prices issued from September 2013 forward. The benchmarks are derived by aggregating individual supplier prices across the General Service tariff rate classes for each electric utility, and then averaging the utility price benchmarks together for a state level benchmark. Finally, these state level benchmarks are averaged across the five business days of each week to create the weekly average price benchmarks by state. These benchmarks reflect the average prices for General Service tariff rate classes by utility and state, based on next month’s start date. As mentioned, these benchmarks are based on matrix prices for commercial customers with an annual usage of up to 1 million kWh. While they are not a valid measure of pricing for larger C&I customers, the high level of correlation between matrix and custom pricing make the benchmarks a reliable measure of how prices are trending, as well as the direction and velocity at which prices are changing week-over-week and month-over-month. This is similar to how the S&P or Dow measures the rate and direction of change in stock market prices over time.
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