Report: Region’s 2014 wholesale power markets competitive
Even as electricity prices climbed in New England last year, the state’s wholesale power markets operated competitively, with prices reflecting the cost of production, ISO New England said Wednesday.
The 2014 Annual Markets Report — the yearly review of the region’s wholesale electricity markets by the Internal Market Monitor of ISO New England — showed that the average price of wholesale electric energy in 2014 rose about 13 percent to $63.32 per megawatt-hour (MWh). That was largely driven by higher fuel costs in the first quarter of 2014, when “extreme cold weather increased demand for natural gas, which generates almost half the electricity produced in New England,” ISO New England’s statement said.
The resulting spike in natural gas prices pushed wholesale prices up, ISO New England said.
ISO New England operates the region’s bulk power system and wholesale electricity markets.
Jeffrey McDonald, ISO New England’s vice president of market monitoring, said: “Overall, 2014 weather was milder compared with 2013, but the extreme cold in January, February and March and the resulting high natural gas and power prices were the main reason for 2014’s higher annual average power price. Lower oil and natural gas prices, combined with mild summer weather that contributed to lower energy usage, and the implementation of several ISO market enhancements that helped improve both reliability and market efficiency, brought generally lower wholesale electricity prices during the rest of the year.”
He added: “The wholesale electricity price trends we saw in 2014 tracked the fluctuations in fuel prices, which is what we expect from competitive markets. In fact, our structural measures of competitiveness for the near-term markets indicated a high degree of competitiveness among participants who provided energy and operating reserves in 2014.”
The report found that the average price of natural gas, which set the wholesale electricity price in 70 percent of the hours in 2014, rose 15 percent last year, from $6.97 per million British thermal units (MMBtu) in 2013 to $7.99 per MMBtu in 2014.
The report also found that, at 127,138 gigawatt-hours, total electricity usage in New England was 2 percent lower in 2014 than in 2013.
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