ERC: Week Ending: February 26, 2015

Short-Term Price Benchmark Trends

The Energy Research Council national price benchmark for retail electricity in deregulated states dropped -2.13% last week to a new low of $0.0710 per kilowatt hour. Prices declined in every state, led by Texas (-3.59%), Ohio (-2.96%), and New York (-2.95%).  The Texas benchmark price is now -8.95% below where it was one month ago.

Long-Term Price Benchmark Trends

So far, the 2015-2016 winter season has had 20% fewer heating days than normal. The forecast is for additional unseasonably warm temperatures. One of the primary heating demand winter months, February, saw natural gas prices decline steadily throughout the month as heating-related natural gas demand remained below normal.

This record-setting winter is a result of the ongoing El Nino weather pattern, which shows no sign of weakening. The National Oceanic and Atmospheric Administration’s eight-to-fourteen day outlook calls for a warming trend in the east, and above-normal temperatures over a majority of the U.S. Record-high temperatures for this time of year are a strong possibility.
Barring a surprise shift in the anticipated weather pattern, demand for natural gas should be limited, and storage withdrawals should be below normal for the last month of the winter season. With storage levels already 29% above the five-year average, we should see a record-setting natural gas surplus as we head into the spring and summer.

Although last week saw the first liquefied natural gas exported from Sabine Pass, it is unlikely the export of U.S. shale gas to global markets will significantly influence our huge storage surplus in the short term. Most analysts are looking for natural gas prices, and subsequently electricity prices, to remain low throughout the shoulder months and into the summer season.


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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.

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