Short-Term Price Benchmark* Trends
As predicted last week, retail power prices followed the decline in natural gas prices in what looks like a delayed reaction to last week’s rollback in gas prices and a strong storage report. ERC’s average power price benchmark dropped last week by -1.33 percent, to $0.0789 per kWh. Power price benchmarks declined in all the restructured states, with the most significant movement in Maine (-3.93 percent) and Texas (-2.64 percent).
Like the week before, last week ERC’s power price benchmarks for longer-term contracts were more favorable than short-term (12/24 month) contracts in Washington DC, Maryland, New Jersey, Pennsylvania and Texas.
Long-Term Price Benchmark Trends
October Nat Gas futures contract decreased by 1.57 percent on the week after the greater-than-expected injection into inventory. The market ended the week in a new lower technical trading range even as the latest short-term weather forecasts predict above normal temperatures (and cooling demand) for the remainder of September.
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.