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Electricity Monthly Update

With Data for July 2014  |  Release Date: Sep. 25, 2014  |  Next Release Date: Oct. 24, 2014

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Regional Wholesale Markets: July 2014

The United States has many regional wholesale electricity markets. Below we look at monthly and annual ranges of on-peak, daily wholesale prices at selected pricing locations and daily peak demand for selected electricity systems in the Nation. The range of daily prices and demand data is shown for the report month and for the year ending with the report month.

Prices and demand are shown for six Regional Transmission Operator (RTO) markets: ISO New England (ISO-NE), New York ISO (NYISO), PJM Interconnection (PJM), Midwest ISO (MISO), Electric Reliability Council of Texas (ERCOT), and two locations in the California ISO (CAISO). Also shown are wholesale prices at trading hubs in Louisiana (into Entergy), Southwest (Palo Verde) and Northwest (Mid-Columbia). In addition to the RTO systems, peak demand is also shown for the Southern Company, Progress Florida, Tucson Electric, and the Bonneville Power Authority (BPA). Refer to the map tabs for the locations of the electricity and natural gas pricing hubs and the electric systems for which peak demand ranges are shown.

In the second tab immediately below, we show monthly and annual ranges of on-peak, daily wholesale natural gas prices at selected pricing locations in the United States. The range of daily natural gas prices is shown for the same month and year as the electricity price range chart. Wholesale electricity prices are closely tied to wholesale natural gas prices in all but the center of the country. Therefore, one can often explain current wholesale electricity prices by looking at what is happening with natural gas prices.

Wholesale prices

Selected wholesale electricity pricing locations

Wholesale electricity prices remained in tight ranges below $85/MWh at all hubs in July. These relatively moderate summer prices are largely the result of moderate natural gas prices, as natural gas-fired generators set the marginal price much of the time in RTO markets.

Several locations, New England (ISONE), New York City (NYISO), Mid-Atlantic (PJM), Midwest (MISO) and Southwest (Palo Verde), experienced peak prices on either July 1 or 2 and all points tended to trend down through the rest of the month. This is partially the result of peak monthly electricity demand, which was highest on July 1 or 2 in ISONE, NYISO, PJM and Southern, and partially the result of natural gas prices, which followed an even more pronounced steady, downward trend through the month of July. Prices in Louisiana at the Henry Hub, which is historically the main natural gas pricing point in the U.S., entered July at $4.43/MMBtu on July 1 and peaked at $4.47/MMBtu on July 2 before falling steadily to end the month at $3.78/MMBtu on July 31.

The correlation between natural gas and electricity prices is strong enough that the prices usually rise and fall in tandem. In New England, the peak monthly natural gas price at Algonquin ($4.93/MMBtu) and the peak monthly electricity price ($69.23/MMBtu) both occurred on July 1. In the Mid-Atlantic, the peak monthly natural gas price at Tetco M-3 ($3.89/MMBtu) and the peak monthly electricity price ($70.10/MMBtu) both occurred on July 2. And in the Midwest, the peak monthly natural gas price at Chicago Citygates ($4.49/MMBtu) and the peak monthly electricity price ($55.67/MWh) both occurred on July 1.

Electricity system daily peak demand

Electric systems selected for daily peak demand

Daily peak electricity system demand levels for the year often occur in July. In fact, New York State (NYISO), Mid-Atlantic (PJM), Midwest (MISO), and California (CAISO) all recorded their all-time peak load levels in previous years during the month of July. This year, Tucson Electric set a new all-time peak demand record of 3,195 MW on July 23 in the middle of a triple-digit high-temperature heat wave. High temperatures of 103-104 degrees Fahrenheit on July 22-24 were seven degrees above average and high by even Tucson's lofty standards. More telling may be the average 24-hour temperature in Tucson on July 23, a sweltering 94 degrees for the day.

In areas other than Tucson Electric, though daily peak demand approached annual highs (or set an annual high in the case of ISONE and MISO), all regions fell well short of all-time peaks. July 2014 peak demand levels were 7%-35% below all-time peaks in all regions other than Tucson Electric. This is largely attributable to weather, as peak electricity demand levels are closely tied to maximum daily temperatures. This July was the 29th coolest average maximum temperature for the contiguous U.S. since 1895 according to the National Climactic Data Center. There may also be other factors at work. The recent, more widespread implementation of energy efficiency and demand response programs in many markets has undoubtedly dampened peak demand levels compared to the levels they could be without adoption of these programs.

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