There is good news for Texas electricity buyers.  The falling price of West Texas Intermediate crude oil, coupled with the threat of an economic slow-down caused by COVID-19, has put downward pressure on forward power prices for this summer in Texas.

Additionally, ERCOT released the preliminary Seasonal Assessment of Resource Adequacy (SARA) for this coming summer.  This report showed more growth than was originally expected in the amount of generating capacity available to meet this summer’s electricity demands.  The potential drop in forecasted electricity demand for this summer, along with favorable news in the SARA report, has come at a good time for some electricity clients in Texas. 

With 2019 finally behind us, it’s time to reflect on how spot/index prices settled last year in Texas and then examine how those prices are shaping the current forward market.

In 2019, index prices in Texas settled at one of the highest levels over the last 10 years.  Figure 1 shows that only 2011 (the year it snowed during the Super Bowl in Dallas with rolling blackouts and a very hot summer) and 2014 had higher index settlements than last year.  The high index settlement price for 2019 should not be much of a surprise given the index price volatility that was experienced in August and September.  Index prices in August 2019 cleared at the highest average price in the history of Texas’ deregulated electricity market, while index prices in September 2019 were at the 4^th highest level in ERCOT’s history.  Most of these high prices came from approximately 6 hours on August 13^th  and August 15^th and two hours on September 22^nd.

In New Jersey, similar to neighboring states, larger electricity users (with a peak demand of over 500 kW) are classified as Commercial Industrial Energy Price (CIEP) customers. For these customers, the default utility price is an hourly rate that is an average of hourly prices over the course of a given month. Since these prices change every 15 minutes, there can be a tremendous amount of price risk and volatility with this structure.  However, over the last five years, there has not been a significant amount of hourly price volatility. Figure 1 shows the average monthly real-time (hourly) price in the Public Service Enterprise Group (PSEG) zone for each month of the year beginning in January 2015.  In New Jersey, and throughout the Northeast, the most volatile times of the year are the winter months of December through March. This is reflected in the chart below with price spikes in January 2018, February 2015, March 2015 and December 2017. It is interesting to note that hourly prices for this winter’s months of January and February are at their five-year lows. 

Wholesale electricity prices in New York have been falling for the past several years.  Figure 1 shows how the price of electricity in New York City, for the period March 2020 to April 2021, has traded over the last six years.  This chart shows that prices have fallen from a high of $80/MWh in the summer of 2014 to current all-time lows of $32.56/MWh.  One might assume that these low wholesale electricity prices would translate into lower retail electricity prices.  Wholesale electricity is only one of several other pricing components that make up a retail electricity price.  After electricity, the next largest price component is Capacity and, unfortunately, Capacity prices have risen dramatically in New York City. 

Last week, Williams Company and its partners announced that they have cancelled plans for the construction of the Constitution Pipeline.  This new 124-mile natural gas pipeline, shown in Figure 1,  would bring 650 Dth of gas per day from the Marcellus Shale to the Southern Tier of New York State.  While public opposition to this project was strong, recent favorable legal and regulatory developments suggested that the construction of the pipeline would proceed as planned.  However, Williams stated the economics of this project have recently changed in a way that there would not be a strong enough return on the company’s investment.  The unfavorable economics associated with the pipeline project are driven by a bearish natural gas market. 

We are excited to have you join us for one of our upcoming regional market webinars.

In early 2019, Con Edison (Consolidated Edison, Inc.) filed for a substantial rate increase for both electric and gas service. The original proposal (“Original Filing” in Table 1) called for electric delivery rates to increase by 7.2% over 3 years, and gas to increase by 12.2% over the same period.  Overall bill increases would have been even larger. In dollar terms, the Company’s original proposal would have increased electric revenues by $2.42 billion over 3 years and gas revenues by over $1.06 billion.

There has been a lot of news lately regarding capacity throughout PJM.  As we have reported in the past, the Federal Energy Regulatory Commission (FERC) and PJM have been at odds over the mechanism by which the price for capacity is set.  In December, the FERC issued a ruling that prescribed new rules and requirements around the auctions that establish capacity prices.  Before getting into those details, we wanted to offer a quick review of what capacity is and why this issue is important.

As you have likely heard, national, and even global, natural gas prices have been falling.  In fact, NYMEX futures prices for the rest of this winter are all trading below $2.00/MMBtu and as shown in Figure 1, the balance of 2020 (Feb – Dec) is trading at $2.10/MMBtu.   These are the lowest prices we have seen since late winter/early spring of 2016.  Prices in the calendar year 2021 haven’t decreased as much, but are trading at all-time lows of $2.35/MMBtu.

ACTUALIZACIONES DEL MERCADO

• "Avalan venta de luz de vecino a vecino", La CRE aprobó que los residenciales que generen energía a través de paneles solares puedan comercializar los excedentes.
  
• "Sener da pie a cumplir de forma irreal meta de energía limpia" Los cambios a los lineamientos de CELs permiten un “cumplimiento artificial” de las obligaciones de generación eléctrica y desincentivan la inversión privada al disminuir el precio de los CELs.