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In This Issue

Wholesale Power Prices To Surge In New England

Electric Grid Provider PJM Makes it Through 'Challenging' January

Natural Gas and Oil Market Update

EIA - Weekly Natural Gas Storage Report

NYMEX Natural Gas Week-to-Week Price Change

Natural Gas Futures - Five Year Price


NOAA 6 to 10 Day Outlook
Color indicates the probability of forecasted temperatures being above or below a historical average for the period.


Wholesale Power Prices To Surge In New England

Forbes | February 6, 2014

The wholesale price of electricity in New England is exploding.

In recent months, nearly 10% of existing power plants in New England have announced plans to retire over the next three years.

The result: capacity deficits and rising wholesale prices.

“The region abruptly went from a capacity surplus and low prices in previous auctions to a capacity shortfall and relatively high prices,” said Gordon van Welie, the chief executive officer of the Independent System Operator for New England (ISO New England), which manages the region’s transmission grid and the wholesale electricity market,

On Monday, the ISO New England completed the eighth annual Future Capacity Market (FCM) auction for 2017 and 2018.

The total cost of capacity for New England rose to $3.05 billion at this year’s FCM. To put the scale of this increase in perspective, the total cost of capacity for the previous seven auctions ranged between $1.06 billion in 2013 and $1.77 billion in 2009.

The major power plants planning to retire in New England in the next three years “include Brayton Point, a 1,535-MW power plant located in southeastern Massachusetts; Vermont Yankee, a 600-MW power plant located in southern Vermont; Salem Harbor, a 750-MW generator in northeastern Massachusetts; and Norwalk Harbor, a 350-MW power plant located in southwestern Connecticut,” according to an ISO New England,” according to ISO New England.

The FCM sets the price of capacity, one of the major components of wholesale power prices, for new and existing resources. It is held three years in advance to provide time for new resources, which include both traditional power generation or demand-side resources, to be developed.

Capacity payments provide economic incentives to attract investment in new and existing supply-side and demand-side capacity resources to ensure that sufficient capacity is available for reliable operation of the bulk power grid.

The first seven auctions ended with a significant surplus of regional capacity. By contrast, Monday’s FCM auction concluded with a deficit of 155 megawatts of capacity required for the 2017 and 2018 commitment period, according to ISO New England.

“The slim capacity margin and the resulting auction prices are a clear signal to the marketplace that the region needs more power generation and demand reduction capacity,” said van Welie.

In deregulated electricity markets, there are two main products: electricity; and capacity. Capacity is effectively a call option on electricity where a resource is paid to be on standby in case it is needed to meet demand. In regions with accentuated peak loads, capacity markets are crucial to keeping the lights on during spikes in demand. Other than Texas, which relies on an energy only market structure, most regional grid operators have some type of capacity market.


Electric Grid Provider PJM Makes it Through 'Challenging' January

Pittsburgh Business Times | February 6, 2014

With a huge weather challenge on its hands, the PJM Interconnection says it delivered by keeping on the lights and the heat for all of its customers. In its nearly 87-year history, the grid operator said in January it experienced eight of the 10 highest winter demands for electricity it has ever recorded.

It hit a new all-time high Jan. 7, when peak demand was 141,312 megawatts. To prevent brownouts, PJM asked commercial, industrial and residential customers to conserve energy.

“PJM again thanks consumers for responding to our requests to conserve electricity,” President and CEO Terry Boston said. “January was a challenging month, and the public response to our calls to conserve helped us manage the impact of the extremely cold weather across the entire PJM footprint.”

PJM, which schedules power deliveries and send those electrons across the transmission system, used a technique known as “demand response.” It’s almost always used during the summer months, when customers might be inclined to run their air conditioners on hot days. It is rare to employ the idea in winter.

How does it work? In cooperation with utilities that are members, signals are sent to customers to cut their consumption. That ensures that the power companies have enough power supplies to meet demand while also allowing all customers to save money, especially the larger ones.

Demand response is giving commercial and industrial concerns more insight into the energy that their facilities consume. By knowing this, they can run specific applications at times of the day that are more favorable to the utilities' rate structure.

Even with such high-tech abilities, PJM and its members have had to deal this month with unplanned generator shutdowns as well as natural gas curtailments and fuel oil delivery problems. Importing power from outside the state, meanwhile, also has been problematic, given that neighboring states have had the same issues.

On average, PJM says energy usage was often 15,000-20,000 MW greater than what might otherwise get consumed on a typical January day. As a result, customers will be paying higher bills for the month.

Natural Gas and Oil Market Update

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Natural Gas Futures Pare Gains After EIA Data

MarketWatch | February 6, 2014

Natural-gas futures on Thursday pared some gains after the U.S. Energy Information Administration reported that supplies of natural gas dropped 262 billion cubic feet for the week ended Jan. 31. The drop was a bit below expectations as analysts surveyed by Platts forecast a decline of between 273 billion cubic feet and 277 billion cubic feet. Total stocks now stand at 1.923 trillion cubic feet, down 778 billion cubic feet from a year ago and 556 billion cubic feet below the five-year average, the government said. March natural gas was at $5.07 per million British thermal units, up 4 cents, or 0.8%. It was trading at $5.11 before the data.


arrow upWTI Crude Climbs a 3rd Day as U.S. Jobless Claims Drop

Bloomberg | February 6, 2014

West Texas Intermediate crude advanced for a third day as applications for U.S. unemployment benefits fell for the first time in three weeks.

Prices climbed as much as 1.5 percent. Jobless claims dropped by 20,000 to 331,000 in the period ended Feb. 1, the Labor Department reported. WTI also followed gains in other commodities as the euro strengthened against the dollar. European Central Bank President Mario Draghi reiterated today that the bank will take action to boost the economy.

WTI for March delivery rose 93 cents, or 1 percent, to $98.31 a barrel at 10:45 a.m. on the New York Mercantile Exchange. The volume of all futures traded was 13 percent more than the 100-day average.

Brent for March settlement gained 68 cents, or 0.6 percent, to $106.93 a barrel on the London-based ICE Futures Europe exchange. Volume of all futures traded was 9.1 percent above the 100-day average.The European crude was at a premium of $8.62 to WTI on the ICE exchange. The spread closed at $8.87 yesterday.

EIA - Weekly Natural Gas Storage Report

EIA - Weekly Natural Gas Storage Report


Working gas in storage was 1,923 Bcf as of Friday, January 31, 2014, according to EIA estimates. This represents a net decline of 262 Bcf from the previous week. Stocks were 778 Bcf less than last year at this time and 556 Bcf below the 5-year average of 2,479 Bcf. In the East Region, stocks were 312 Bcf below the 5-year average following net withdrawals of 143 Bcf. Stocks in the Producing Region were 187 Bcf below the 5-year average of 889 Bcf after a net withdrawal of 93 Bcf. Stocks in the West Region were 56 Bcf below the 5-year average after a net drawdown of 26 Bcf. At 1,923 Bcf, total working gas is below the 5-year historical range.

NYMEX Natural Gas Week-to-Week Price Change NYMEX Natural Gas Week-to-Week Price Change

Natural Gas Futures - Five Year Price

NYMEX Natural Gas Week-to-Week Price Change - Five Yearly Snapshot
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