ERC: Retail Electricity Price Trends for the Week Ending May 4

Short-Term Price Benchmark Trends

As we enter May, the start date for ERC’s average price benchmarks for retail electricity shifts to June 2015. Price benchmarks last week declined across the board, led by Rhode Island, Illinois and Ohio. This marks the forth week in which there has been an overall decline in the average price benchmark across all utilities in the 13 deregulated states. New York and New Jersey posted the smallest declines in their average price benchmarks.

Last week, many suppliers removed 60-month, and in two cases 48-month contract terms from their matrix prices. This happens periodically when the risk curve associated with longer-term contracts is difficult to estimate due to market factors. For example, over the past year there has been a substantial increase in the number and extent of non-energy cost components levied by regulatory bodies and ISOs. Suppliers also tend to pull their longer term, more risky contract terms when periodically re-evaluating their overall pricing strategy. For perspective, contracts longer than 36 months generally comprise a very small proportion (less than five percent) of a supplier’s contract portfolio.

In most states, 24-month contracts continue to provide the most favorable benchmark prices.

Longer-Term Electricity Price Drivers

The National Oceanic and Atmospheric Administration’s (NOAA’s) 6–10 day weather forecast calls for above-average temperatures across much of the eastern half of the country. This may increase cooling demand as we move into the mid-May. Summer heat and the upcoming tropical storm season will be closely monitored as the next major catalysts for market direction.

The EIA reported that demand in the residential/commercial sector rose 18.4 percent during the week of April 29, due primarily to cooler than normal temperatures. Despite this strong late-season demand and the resulting spike in natural gas prices up to $2.776/MMBtu at the end of last week, downward pressure on prices will likely continue going forward, with total supply increasing 0.8 percent week over week, a 9.2 percent year-over-year increase.


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.

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