EIA introduces short-term forecasts for wholesale electricity prices

Beginning with the August edition of the Short-Term Energy Outlook (STEO), published yesterday, the U.S. Energy Information Administration (EIA) is adding forecasts of wholesale electricity prices at representative hubs in 11 electricity supply regions of the Lower 48 states. EIA expects average wholesale electricity prices in 2019 will be lower than last year in most regions, primarily as a result of milder weather and lower natural gas prices. The largest forecast declines in wholesale electricity prices occur in Texas and New England.

The projected monthly average wholesale electricity prices in the STEO indicate expected trends in regional market conditions, rather than a prediction of actual price levels. In addition to the new wholesale price forecasts, the STEO is expanding its forecasts of electric power generation and fuel consumption in these 11 electricity supply regions, Hawaii, and Alaska.

EIA expects the largest annual decline in wholesale electricity prices will occur at the Electric Reliability Council of Texas (ERCOT) North hub in Texas, where prices are forecast to fall by 28% in 2019 to an annual average of $30 per megawatthour (MWh). The 2018 average price was higher mainly because of price spikes in July 2018, when the ERCOT North hub price averaged $112 per MWh as a result of record levels of electricity demand. Based on weather forecasts developed by the National Oceanic and Atmospheric Administration, EIA expects relatively milder summer weather in Texas to lead to lower summer electricity demand in ERCOT.

Wholesale prices at the New England Independent System Operator’s (ISO-NE) Internal hub have historically been the highest in the United States, but EIA forecasts its wholesale price in 2019 will decline 25% to an average of $37 per MWh. New England wholesale electricity prices spiked in January 2019 as a result of cold weather and constraints on delivered natural gas to electric generators. However, increased imports of liquefied natural gas (LNG) into the region have helped moderate natural gas prices, and EIA expects these increased fuel supplies will keep wholesale electricity prices relatively low in 2019.

In the western United States, EIA forecasts 2019 prices at the California Independent System Operator (CAISO) SP-15 hub in California and the Palo Verde hub in the Southwest to be about 22% lower than the average 2018 prices. This expected decline reflects the overall forecast decline in U.S. natural gas fuel costs. Natural gas prices in the Pacific Northwest spiked earlier in 2019, along with electricity prices at the Mid-Columbia hub on the Washington-Oregon border, as result of pipeline constraints in British Columbia. EIA expects the average annual electricity price at Mid-Columbia to be relatively unchanged from last year.

Principal contributors: Tyler Hodge, Scott Jell