moore-jim

ERC Price Benchmark Trends Week Ending: December 2, 2016

ERC’s national average benchmark price for a January electricity contract rose last week by 2.8%, to $0.0738 per kilowatt hour (kWh). Electricity prices posted a strong gain in every deregulated state last week, led by the District of Columbia (4.2%), Delaware (4.0%), Connecticut (3.7%), and New Jersey (3.5%). Electricity prices are now just about back to where they were a month ago.

Looking back over the past 12 months, the national average price for a 36-month January 2017 electricity contract has dropped 5%. The price of a 12 and 24-month contract has dropped by 2.5% over the same timeframe.

Last week, longer term (36-60 month) contracts were more favorable than shorter term (12-14 month) contacts in Maryland, New Jersey, Ohio, and Pennsylvania.

Short Term Trend

Last week’s spike in retail electricity prices was matched by a significant surge in natural gas prices. Much colder weather forecast for the Northeast drove the January natural gas futures contract from $3.188 at the end of a holiday-shortened week to over the $3.50 per MMBtu level last Friday. Prompt month prices have not been this high in almost two years, since December 2014.

The weather forecast for the first half of December is not only calling for below normal temperatures over most of the east coast, but also for most of the country outside of the west coast and southwest. These colder temperatures should spike heating demand over a major portion of the US and begin to draw down on the large natural gas surplus in storage.

Natural gas prices have been steadily rising since hitting a bottom in early November of this year. 

From a technical perspective, the January contract ended Friday’s trading session back in the previous technical trading range that has been in play for most of the time since the middle of June. The January Nymex natural gas contract’s current boundaries are around $3.501/MMBtu on the resistance side and $3.224/MMBtu on the support end.

Price Benchmarks Wk Ending 12-2-16Price Benchmarks by Contract Term Wk Ending 12-2-16

James Moore, Ph.D., is CEO of the Energy Research Council (ERC). He 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.

* ERC electricity price benchmarks are derived by: 1) aggregating daily matrix prices issued by many electricity suppliers across General Service tariff rate classes for each electric utility; 2) averaging each utility’s price benchmark together for a state-level benchmark; and 3) averaging state-level benchmarks across five business days to create weekly average price benchmarks, based on next month’s start date, for commercial customers with an annual usage of up to one million kWh. The high level of correlation between matrix and custom pricing makes ERC price benchmarks a reliable measure of how prices are trending, and the direction and velocity at which prices are changing week-over-week and month-over-month. This is similar to how the S&P and Dow measure the rate and direction of change in stock market prices over time.

Price Benchmarks National Average Wk Ending 12-2-16Price Benchmark Changes Wk Ending 12-2-16

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