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Electricity Monthly Update

With Data for August 2014  |  Release Date: Oct. 24, 2014  |  Next Release Date: Nov. 24, 2014

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Regional Wholesale Markets: August 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

This was a very different August than is usually the case in the wholesale electricity markets. Wholesale electricity prices in August are typically near or at the highest levels for the entire year. This August however, New England (ISONE), New York City (NYISO) and the Mid-Atlantic (PJM) all set 12-month low prices for the year. New England set its new rolling 12-month minimum price on August 15 at $27.56/MWh, New York City set its 12-month minimum price on August 14 at $32.89/MWh and Mid-Atlantic set its 12-month minimum on August 15 at 32.71/MWh. Mid-August is typically a time of high electricity demand and prices, so to set yearly minimums during this time is very unusual.

The low electricity prices during this time (August 14-15) is partially due to lower electricity demand, or load, on these days. ISONE, NYISO and PJM loads were 25-28% below August 2014 highs on those days, and August peak loads this year were not very high themselves compared to other years. Also, and possibly more important, were natural gas prices in these areas.

Natural gas prices in New York City and Mid-Atlantic remained below $3/MMBtu for the entire month of August and reached a low of $1.87/MMBtu in New York City and $1.84/MMBtu in Mid-Atlantic in late August. Natural gas prices in New England remained below $3/MMBtu on all but two days in August and reached a low of $2.21/MMBtu during the month. In electricity markets where natural-gas fired generation sets the marginal price much of the time, and particularly during peak hours, low natural gas prices will almost invariably lead to low electricity prices.

The one region that had higher electricity prices in August, Texas (ERCOT) at $87.50/MWh, was also the one region that had legitimately high summer loads. Loads in ERCOT exceeded 65 GW on five days and reached 66.45 GW on August 25. This is just below ERCOT's 68.4 GW all-time peak load. But even this price was not high in relation to previous years, as natural gas prices in Texas ranged from $3.74-$4.03/MMBtu during the month and this was not the sustained, widespread, high loads affecting large areas that had driven up loads and prices in previous years.

Electricity system daily peak demand

Electric systems selected for daily peak demand

Daily peak electricity system demand levels in August were notable for the wide range of results and some of the results on the lower end of the 12-month range. In the Northwest (Bonneville Power Administration) and New England (ISONE), there were peak demand days approaching just 50% of the all-time peak and New York State (NYISO) had peak demand days just 55% of its all-time peak. Peak demand is largely driven by maximum temperatures (slightly different than average around-the-clock temperature readings) which cause consumers to turn on, and up, their air conditioners as temperatures rise. This August, Virginia and Utah recorded their seventh and eighth coolest maximum temperature in August in history, 17 states had maximum temperature averages in the bottom quartile all-time, and 40 of 50 states were below average for the month.

On the other hand, there were a few areas that had some warmer weather and associated higher peak demand levels. Texas (ERCOT) recorded several days of very high demand with its peak load day just 3% below all-time peak levels. Progress Florida also had high peak demand, setting a new high for its 12-month range, though demand fell well short (15%) of all-time peak levels. Florida was one of the few outliers in August weather-wise, with the 5th warmest August on record by average temperature, contributing to higher electricity demand in that area. The Midwest (MISO) also experienced high demand, with its 115 GW peak day for the month, not too far off its 126.3 GW all-time record.

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