The State of New Jersey has been at the forefront of an ongoing conflict between a state’s right to establish its own clean energy goals and its participation in a regional competitive electricity marketplace. New Jersey belongs to the PJM Interconnection (PJM), which spans all, or parts of 13 states and the District of Columbia as shown below in Figure 1. New Jersey and many other states want to adopt their own clean energy standards. However, grid operators, such as PJM, are finding it nearly impossible to create a competitive marketplace with consistent rules among states that have very different renewable power goals and carbon emission standards.

ACTUALIZACIONES DEL MERCADO

• "Acuerda OPEP recorte histórico", La organización y sus aliados recortarán 9.7 millones de barriles al día, México logró su cuota de 100 mil con la ayuda de EU.
• "Caída del precio del petróleo: el crudo estadounidense WTI se desploma y se cotiza en negativo por primera vez en la historia", niveles nunca antes vistos.

The biggest story in Texas’ energy markets has been the collapse of West Texas Intermediate (WTI) crude oil prices. The price for the WTI May contract had its largest single-day decrease on Monday, April 20^th. It was also the first time in history that the price of crude was negative and closed below zero at the end of the trading day. There was a slight recovery the following day as the price rose above zero and settled at $10.01 per barrel on Tuesday.  In addition to having a massive impact on Texas’ economy, this unprecedented drop in the price of WTI crude is also having a significant impact on natural gas prices. 

The market price for oil has been consistently bearish since global oil demand destruction conversations began in early March.  On Monday, April 20^th, that outlook manifested itself into a day that oil traders will never forget. Crude oil opened trading on Sunday evening at approximately $17 per barrel and by mid-morning, it had dropped to $10 per barrel. By mid-day, it was trading just above zero, and then it broke through into negative territory in the afternoon.  Crude oil settled for the day at -$37.63, up just a few dollars from the daily low of -$40.32 per barrel.

There is often both good and bad news anytime commodity markets are volatile.

The bad news:

Earlier this month, the NYISO  (the entity in charge of economically maintaining the electricity system in New York) completed the first two of three capacity auctions that ultimately set the price paid for capacity in the coming summer months (May – Oct 2020).  Many were anticipating higher summer capacity prices (especially in New York City) from this month’s auction given how high forward capacity prices have been.  Historical capacity prices for New York City and the rest of New York State are shown in Figure 1. 

Unlike ERCOT, which relies solely on the price of energy to ensure sufficient supply, the PJM market, ISO-NE, and the NYISO all rely on capacity payments to ensure that there is enough electricity generation available to meet demand. Like wholesale energy prices, capacity prices in PJM are set through an annual auction. Generating units that clear this annual capacity auction are guaranteed a fixed revenue stream in exchange for the guarantee of their availability to run if called upon. This revenue is designed to ensure that an appropriate amount of generation is available at times of peak energy demand.

In light of the impact of the Coronavirus on business operations, we are sharing information about Coronavirus and Contract Disputes circulated by the law firm Sidley & Austin.  It provides a high-level summary of the force majeure issues raised by the spread of this illness.  If your electricity and/or natural gas usage has or will be significantly affected by the spread of the Coronavirus, you should seek legal advice to determine if it is appropriate to provide a force majeure notice to your energy supplier.  As discussed in the document, the relevant electricity or natural gas contract provision may require “prompt” notice of the force majeure event.

Over the past month, there have been a few regulatory developments that will affect generators, their amount of generating capacity and the cost of that capacity throughout New York State.  Recently, the Federal Energy Regulatory Commission (FERC) issued several rulings related to the ways subsidized renewable generating assets will be able to participate in future NYISO capacity auctions.  These rulings place limits on the way generation from subsidized assets, such as wind farms, solar arrays and battery storage resources, can take part in New York’s capacity auction process.  Furthermore, New York State placed additional emissions restrictions on natural gas and oil-fired assets that run during periods of peak electricity demand on the grid.                

This week PJM proposed a plan and schedule to resume its suspended capacity auctions.  If everything goes as planned, the next PJM capacity auction process using the new Minimum Offer Price Rule (MOPR) would begin in March or April 2021.  In order to meet this goal, the Federal Energy Regulatory Commission (FERC) must review and approve PJM’s MOPR.  PJM’s last capacity auction was in May 2018.  The plan and proposal to catch up on the backlog of capacity auctions are summarized below and shown in Figure 1.

On Sunday, March 8^th, the NYMEX natural gas market opened at approximately $1.67/MMBtu. By the early morning hours of Marh 9^th, it dropped down to almost $1.60 and ended the day up about 9¢, at $1.78/MMBtu.  On Tuesday, March 10^th, natural gas again rallied another 16¢ to close around $1.94/MMBtu.  By Wednesday morning, the rally continued up to about $2.00/MMBtu before news around COVID-19 began to take hold, moving the market down.  These market movements are shown below in Figure 1 (note that the height of the line shows the day’s range between the minimum and maximum trade prices, the height of the bar is that day’s difference between opening and closing prices, and the color of the bar indicates if the day closed up (green) or down (red) compared to the open).