Short-Term Price Benchmark* Trends
The average price benchmark for Power ($/kWh) for week ending July 31 dropped by slightly more than one percent (-1.13 percent), compared to the previous week. The largest decline was in Delaware (-3.63 percent), followed by New Jersey (-2.76 percent), Ohio (-2.79 percent), and Rhode Island (-2.34 percent). The big exception to the downward trend in power prices last week was in Illinois, where prices increased by 3.78 percent. Power prices in Illinois are now 6.73 percent higher than a month ago. By contrast, power prices are 6.03 percent lower in Ohio than this time last month.
Last week 36-month contracts were most favorably priced in Washington DC, Maryland, New York, Ohio and Pennsylvania. In addition, 48-month contracts were favorably priced in Illinois, while 60-month contracts were attractive in Pennsylvania.
The latest NOAA six-to-10-day and eight-to-14-day forecasts are projecting below normal temperatures over the upper half of the country through August 16. Above normal temperatures are confined to the western coastal regions and the southern coastline.
Long-Term Price Benchmark Trends
With much cooler weather forecasted, it is likely that summer demand and near-record natural gas production in the coming weeks will continue to depress natural gas futures. The Sep Nat Gas futures contract decreased by 2.13 percent or $0.059/mmbtu last week even after a slightly smaller than expected net injection into inventory. The market ended the week in a new lower technical trading range as the short-term weather forecasts predict lower demand.
U.S. power plants fueled by natural gas supplied more of the country’s electricity than coal-fired plants for the first time in April. May, however, saw coal edging out gas as the fuel of choice. For the year, the US Energy Information Administration anticipates coal plants to fuel just 36 percent of the nation’s electricity production, down from 39 percent last year, while gas plant’s share is seen going from 27 percent to 31 percent.
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.