U.S. Energy Information Administration logo
Skip to sub-navigation

Electricity Monthly Update

With Data for April 2020 Release Date: June 24, 2020 Next Release Date: July 24, 2020

Highlights: April 2020

  • Electricity system peak demand levels set new 12-month lows in Southern Company, New York State, New England, the Mid-Atlantic, California, Progress Florida, and the Midwest (MISO).
  • Wholesale electricity prices set new 12-month lows in New York City, the Mid-Atlantic, the Midwest, Louisiana, and Texas. Wholesale natural gas prices set new 12-month lows in Texas and at the Henry Hub (Louisiana).
  • Net electricity generation in the United States decreased 6.7% in April 2020 compared to the previous year, mainly due to mitigation efforts for the 2019 novel coronavirus disease (COVID-19).

Key indicators

Natural gas pipeline constraints can be a contributor to wholesale electricity price changes

Many factors affect wholesale electricity prices, and, in particular, they are highly correlated with spot natural gas prices. The amount of spare capacity on pipelines delivering natural gas into end use markets can affect the wholesale price of natural gas in a given market, which in turn, can affect wholesale electricity prices. Constraints on natural gas deliveries affect spot electricity prices in two general ways:

  • Rising natural gas demand in a region, or an outage on a natural gas pipeline, constrains natural gas pipeline capacity. In those cases, generating capacity that burns natural gas has to pay more for scarce capacity or seek more expensive alternatives.
  • Natural gas supply growth in a region can outstrip the natural gas pipeline capacity needed to serve natural gas customers. As a result, a supply surplus can promote competition among natural gas producers and marketers, contributing to lower natural gas prices that reduce production costs for generators.

In regions where delivering natural gas pipelines are less fully utilized, spot natural gas prices tend to follow regional and national price averages more closely. Less constrained natural gas pipeline corridors can lead to electricity prices that reflect national benchmark wholesale electricity prices—which may move higher or lower depending on the market circumstance.

Changes in spot natural gas prices influence spot electricity prices in most regional power markets in the United States because natural gas tends to reflect the marginal fuel for power generation. Most electricity sold is in markets that use locational marginal pricing as a key component to determine the value of electricity by hour and location. The prices for electricity in a given hour are determined by the cost of the most expensive unit needed to meet demand. In many U.S. electricity markets the delivered price of natural gas sets the marginal price of electricity for many time intervals during the year in the day ahead and the real-time markets.

Reasons leading to various constraints on natural gas pipelines include:

  • Rising demand for natural gas, especially in electric power and industrial sectors, or for export by pipeline or as liquefied natural gas
  • Regional imbalances between natural gas supply and demand
  • Temporary reductions in natural gas pipeline capacity to perform safety inspections or maintenance
  • Disruptions related to unplanned outages or repairs
  • Sustained relatively low natural gas prices
  • Limitations affecting the availability of other natural gas or energy infrastructure
  • Regulatory delays
  • Temporary reductions in pipeline capacity availability to expand or tie in new capacity
  • Reductions in capacity to build or tie in new capacity

The duration of these constraints varies, but it can generally be grouped into three categories. Short-duration occurrences are mostly related to temporary weather conditions or non-critical maintenance that can be resolved quickly. Moderate length congestion can result from lengthy repairs or heavy seasonal loads. Longer term, structural constraints are usually the result of local or regional imbalances in supply and demand that may require changes in infrastructure.

The map and table below show for select markets where natural gas pipeline constraints have contributed to material changes in wholesale electricity prices during the past several years.

Source: U.S. Energy Information Administration, U.S. Energy Mapping System.

1. New England. During the Bomb Cyclone event in late December 2017 and early January 2018, fully utilized pipelines constrained natural gas deliveries. Generators had to rely on more expensive sources of energy including distillate and residual fuel oil and liquefied natural gas, leading to high spot electricity prices.

2. New York. During the winter of 2013-14 Polar Vortex period, episodic bitter cold temperatures raised natural gas demand and congested pipelines. Spot natural gas prices topped $120 per million British thermal units (MMBtu) at one point and material generator-forced outages contributed to spot power prices of more than $600 per megawatt-hour (MWh) at the New York Independent System Operator (NYISO) Zone J.

3. Pennsylvania. Rising natural gas production in Appalachia since 2010 has generally outpaced the expansion of natural gas pipeline and processing infrastructure and depressed spot prices to substantial discounts to the Henry Hub benchmark.

4. Southwest. Rising associated gas contributions from well completions in the Permian Basin have outstripped increases in natural gas take-away pipeline capacity in the Southwest, and pushed down natural gas prices. In turn, this imbalance has contributed to generally low electricity prices in the Southwest Power Pool (SPP) South Zone and the Electric Reliability Council of Texas’ (ERCOT) West Zone and in western Texas generally.

5. Southern California. Maintenance and repairs to the Southern California Gas Company (SoCalGas) backbone transmission pipelines have limited natural gas deliverability in recent years. Reduced deliverability and Aliso Canyon Storage capacity restrictions have contributed to electricity price volatility.

6. Pacific Northwest. In the aftermath of the October 9, 2018 explosion on Enbridge’s BC Pipeline in British Columbia, U.S. gas imports into the Northwest Pipeline at Sumas, Washington, were reduced during the winter of 2018-19, and played a role in the March 2019 natural gas price spike that caused the spot electricity price at the Mid-Columbia, or Mid C, trading point in Washington state to rise to almost $900/MWh.

The mini charts below show examples of how natural gas constraints in recent years affected wholesale electricity markets for discrete events.

Source: U.S. Energy Information Administration, based on Bloomberg, EnergyGPS, IHS Markit and S&P Market Intelligence.

Notes: The charts for New England, New York, Southern California, and the Pacific Northwest use daily natural gas and electricity prices. The charts for Pennsylvania and the Southwest use average monthly natural gas and electricity prices.

MMBtu is equal to one million BTU (British Thermal Units).

Increased natural gas demand and pipeline capacity has changed the potential for constraints in some regional U.S. wholesale energy markets. Overall natural gas use in the United States has grown by more than 30% since 2009. Average annual use of natural gas for power generation grew from about 18.9 billion cubic feet per day (Bcf/d) in 2009 to about 31 Bcf/d in 2019, up 65%. Natural gas accounted for about 37% of utility-scale generation in 2019, a larger share than any other source.

Analysts can get more information on the EIA website about energy trends that affect natural gas and electricity prices. The Southern California Daily Energy Report and New England Dashboard provide daily market updates on how regional natural gas flows influence spot electricity prices.

EIA’s About U.S. Pipelines webpage presents quarterly updates on the status of new natural gas pipeline projects; the commercialization of new natural gas pipeline capacity can affect electricity prices.

EIA’s Electricity Power Monthly provides information on changes on generator capacity additions or retirements for the upcoming year based on generator plans.

The Electricity Data Browser is an interactive tool that provides plant-level or aggregate historical data in graphical and map form.

EIA also provides access survey-level data files.

Lastly, EIA’s Today in Energy and the Natural Gas Weekly Update publish occasional commentary on natural gas pipelines and their effects on markets.