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ERC: Retail Electricity Price Trends for the Week Ending May 8

May 13, 2015 By Jim Moore, PhD

Jim Moore, PhD

Short-Term Price Benchmark Trends

After a month of declining retail electricity prices, ERC’s average price benchmarks increased last week in almost all of the 13 deregulated states. Leading the surge was Texas, with just over a 3 percent increase in its average price benchmark. Only Maine continued a downward trend in its average price benchmarks. While still below where prices stood a month ago, this is likely the beginning of a progressive rise in commercial electricity prices as we begin high cooling demand of the summer season.

Fueling the increase in electricity prices was a late week spike in natural gas prices, as predictions of a warming trend crept into the weather forecast. On Friday, Jun15 NYMEX blew through its key resistance level at $2.80 to settle as $2.880/MMBtu. From a technical perspective, spot natural gas futures contracts are moving higher into a new technical trading range for the second time in two weeks.

Prices for some of the longer contract terms crept back into the market last week. In most states, the most favorable price benchmarks were again for 24-month contracts.

Longer-Term Electricity Price Drivers

The latest weather forecasts from the National Oceanic and Atmospheric Administration (NOAA) continue to call for above-normal temperatures developing in the eastern United States over the next few days. These above-normal temperatures are then expected to expand over almost half the country.

Warming temperatures and early cooling demand could limit larger storage injections. The Energy Information Administration (EIA) recently predicted that the average storage build of 77 Bcf per week would fall short of the 78 Bcf per week needed to eliminate the deficit in the five-year average.

REB ERC Price Benchmarks Wk Ending 5-8-15REB ERC Price Benchmarks by Contract Term Wk Ending 5-8-15

 

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.

2 comments on “ERC: Retail Electricity Price Trends for the Week Ending May 8

  1. What are the Weekly Average Retail Electricity Price Benchmarks? It’s not clear to me what this information represents.

  2. 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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