Short-Term Price Benchmark Trends
After a month of declining retail electricity prices, ERC’s average price benchmarks increased last week in almost all of the 13 deregulated states. Leading the surge was Texas, with just over a 3 percent increase in its average price benchmark. Only Maine continued a downward trend in its average price benchmarks. While still below where prices stood a month ago, this is likely the beginning of a progressive rise in commercial electricity prices as we begin high cooling demand of the summer season.
Fueling the increase in electricity prices was a late week spike in natural gas prices, as predictions of a warming trend crept into the weather forecast. On Friday, Jun15 NYMEX blew through its key resistance level at $2.80 to settle as $2.880/MMBtu. From a technical perspective, spot natural gas futures contracts are moving higher into a new technical trading range for the second time in two weeks.
Prices for some of the longer contract terms crept back into the market last week. In most states, the most favorable price benchmarks were again for 24-month contracts.
Longer-Term Electricity Price Drivers
The latest weather forecasts from the National Oceanic and Atmospheric Administration (NOAA) continue to call for above-normal temperatures developing in the eastern United States over the next few days. These above-normal temperatures are then expected to expand over almost half the country.
Warming temperatures and early cooling demand could limit larger storage injections. The Energy Information Administration (EIA) recently predicted that the average storage build of 77 Bcf per week would fall short of the 78 Bcf per week needed to eliminate the deficit in the five-year average.
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.