ERC: Electricity Price Trends for the Week Ending October 2

Short-Term Price Benchmark* Trends

Moving to a prompt month of November, last week’s power price benchmarks fell again by a full percent (-0.96 percent), and by two percent (-1.97 percent) compared to a month ago. Retail electricity prices have now declined for the three weeks in a row. The biggest decline last week was in New York (-2.15 percent), leaving the empire state -3.19 percent lower that last month. Ohio (-1.75 percent) and Delaware (-1.60 percent) also saw a relatively large decline in their benchmark prices last week.

For the last three weeks, ERC’s power price benchmarks for longer-term contracts have been more favorable than short-term (12/24 month) contracts in Washington DC, Maryland, New Jersey, Pennsylvania and Texas.

The three-week decline in electricity prices continues to mirror (and be driven by) depressed natural gas prices. November’s natural gas futures contract decreased by 6.84 percent at the end of last week after a bearish injection into inventory. The market remains oversupplied with the overall fundamentals pressuring natural gas prices downward. As a result, the market ended the week in a new lower technical trading range even as the latest short-term weather forecasts call for above normal levels of cooling demand through the third week in October.

ERC Avg Wkly Benchmarks 100815Long-Term Price Benchmark Trends

The natural gas market is now at its lowest level since about mid 2012. Moderate temperatures in September have depressed demand and caused above normal storage injections to swell an already record surplus level. Forecasts for the remainder of October indicate above normal storage injections will continue into the shoulder months preceding winter. Reduced production that was expected due to a depressed natural gas market and a recent reduction of oil-rigs has not been realized. Looking forward, any significant price support will likely require further erosion in the margins associated with natural gas production, an accelerated conversion from coal to gas, a sustained cold spell, and/or declining Canadian imports coupled with significant natural gas exports to Mexico.


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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