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Energy Market Update: March 27, 2019

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When demand increases, a price spike will usually follow -- it’s a basic law of economics. So what happens in New York City, for example, when summertime hits and everyone in the city cranks their AC? That’s right—the whole city pays more.

Today, Direct Energy Business Strategist Tim Bigler uncovers what’s happening to peak electricity prices across the country, and whether market behavior is caused by increased demand alone.


NYISO Zone 6

New York, as we stated earlier, sees increased electricity demand in the summertime. This corresponds to increased natural gas prices, and in some cases, the region will use oil for electricity generation. Electricity prices went up, and up, and up towards the end of 2018 and have stayed quite elevated since. The good news, however, is that they have remained more or less steady through the first three months of 2019.


Natural gas supply has increased in this region, which has had the pleasant side effect of tempering electricity prices. Whereas NYISO Zone J has remained steady at an elevated price in 2019, Pepco prices have cruised along at a less expensive level.


High regional gas prices, combined with the looming closure of the only working nuclear plant in Massachusetts, have added risk premiums into this region. These factors, along with constraints due to routine pipeline maintenance, have driven electricity prices continually higher beginning around August 2018 through present day.


PSEG has benefited from relatively inexpensive natural gas in recent months. This region has also invested heavily in Network Integration Transmission Services (NITS), meaning that end users today are paying less in NITS charges compared to consumers in other regions. Electricity prices in this region have therefore remained relatively low in 2019.


Despite being rich in natural gas, the Midwest/Mid-continent is seeing elevated electricity prices due to the risk premium associated with transmission in the region. Prices in general increased as 2018 drew to a close, and have remained at elevated levels this year. The regions affected, in descending order of price at the time of writing, are as follows:

  • Duquesne

  • West Hub


  • PPL/COMED (tie)


Prices in Texas have not responded well to the historically low (at times single-digit!) reserve margins ERCOT has seen in recent months. As a result, ERCOT prices have been among the highest in the country as of late, though they have seen a small, encouraging dip in March which could persist as weather permits.

CAISO SP15/NP15 (California)

Gas prices in California continue to rise and drive electricity prices higher along with them. Cold weather and low gas storage levels on the west coast pushed prices up last year, and appear to be doing so again despite letting off the gas somewhat in January. Unfortunately, it is unclear when, or even whether, this trend will be reversed.

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Posted: March 27, 2019