ERC Price Benchmarks Week Ending 6/9/17


Energy Research Council’s (ERC) national average benchmark price for electricity fell again last week, dropping by 1.3% to $0.0737 per kilowatt hour. With the previous week’s decline, prices are now 1.9% lower than at the end of May. In New York, prices plummeted last week by 4.2%. Electricity prices also saw a sharp decline in Texas (-2.9%), Illinois (-2.7%), and Massachusetts (-2.6%).

Electricity prices are now lower than they were a month ago in every state, with the largest month-over-month declines in New York (-4.1%), Illinois (-3.7%), Massachusetts (-2.4%), Texas (-2.3%), and Connecticut (-2.2%).

Last week, benchmark prices for longer term (36-60 month) electricity contracts were again lower than short-term (12-24 month) contracts in Maryland, Massachusetts, New Jersey, Ohio, and Pennsylvania. As in past weeks, longer term electricity contracts result from forward power prices that are hovering within 5% of their all-time lows in PJM, MISO, and ERCOT.

The NYMEX July 2017 natural gas contract dropped below $3/MMBtu last week, but as of Monday the prompt month contract is trading in the $3.07 range. That puts spot July prices at the high end of a technical trading range spanning $3.08/MMBtu on the resistance side and $2.90/MMBtu on the support side.

Last week, the amount of natural gas in storage grew by 106 Bcf, exceeding almost all estimates. Total gas in storage now stands at 2631 Bcf, which is 332 Bcf (11%) below last year at this time, and 237 Bcf (10%) above the five-year average. While last week’s injection may be followed by another slight increase this week, the trend appears temporary. A warming trend continues across most of the country, and is predicted to continue into the last week of June. The warming pattern in the six-to-ten day forecast is primarily concentrated over the western part of the country and parts of the East Coast. The eight-to-fourteen day projects a slight easing of temperatures, with the heat beginning to dissipate in the mid-section of the U.S. Currently only the two coastal regions are expecting above-normal temperatures through the remainder of this month.

Last week, total U.S. consumption of natural gas rose by 1% compared with the previous report week. Power burn climbed by 11% week-over-week, primarily due to unseasonably hot temperatures and high cooling demand in the Midwest and Southwest. Industrial sector consumption decreased by 1% week- over-week, and in residential/commercial sectors consumption declined by 18%, a decrease of less than 2 Bcf/d. Natural gas exports to Mexico last week decreased 7%, while liquefied natural gas (LNG) exports remained flat week-over-week.

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.

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