Energy Market Update: February 20, 2019

Recent cold weather means energy market volatility. In today's Energy Market Update, Tim Bigler explains what's happening with California energy prices:

Electricity prices in California have had a volatile month, to say the least. Extremely cold weather, along with pipeline issues and ongoing repairs to the Aliso Canyon gas storage facility have driven spot prices as high as $160 and as low as $60 (per MWh) over the course of just one week (between February 7-14, 2019). Given that natural gas is increasingly used for electricity generation, natural gas prices would probably look similar to this in terms of volatility.  

Taking a longer view, we can see that the SP15 zone (which comprises most of Southern California) saw a peak toward the end of last year with respect to Q3 2019 contracts. The month of January saw a dramatic drop of about $14/MWh, from which the market is just now starting to bounce back.

What’s the lesson here? For one, volatility is, for now, the norm in California. For another, a managed product could be the key to managing risk.

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