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In This Issue

Growing Transmission Costs are Raising Region’s Electricity Rates

PSEG Shutting its Last Two Coal Plants in New Jersey

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.


Market Overviews

Growing Transmission Costs are Raising Region’s Electricity Rates

Concord Monitor | October 6, 2016

The cost of moving electricity around New England, not just creating it in the first place, is a big part of the reason why power costs so much here, panelists were told at an energy summit Monday.

“When I was on the PUC, we gave very little attention to the transmission piece of the customers’ bill because it was rather small in comparison to the large energy segment and distribution costs,” said Susan Geiger, who was a public utilities commissioner for a decade and is now an attorney focusing on energy matters.

No longer.

Wholesale transmission costs – fees for moving electricity long distances, before it travels along streets via lower-power distribution lines – are rising fast. They make up about 11 percent of the average Eversource ratepayer bill in New Hampshire compared with just 2 percent of the bill in 2006, figures that are “similar for other utilities in the state,” said PUC Commissioner Robert Scott.

“There’s a troubling trend here,” Scott told the crowd that filled a ballroom at the Concord Holiday Inn. “New England is an outliner – with the highest transmission costs compared to any other region.”

Transmission costs are still a much smaller portion of electricity bills than the cost of creating electricity, which takes up about half of most bills. But this sharp increase is drawing attention.

Late last year FERC, the federal agency that regulates many aspects of electricity production, opened an investigation into why New England transmission costs are so high.

Scott and Geiger were among the panelists who discussed transmission costs during the morning-long summit, an annual gathering put on by the New Hampshire Independent Energy Council.

The panel, which featured quick appearances from a half-dozen candidates for statewide office, discussed topics that have long been at the forefront of the debate about New England’s electricity. These included the region’s large and growing dependence on natural gas as a fuel to create power, and the difficulties that current technical and financial models have in coping with the increase in distributed and renewable energy.

The issue of transmission has usually cropped up only in relation to the Northern Pass project, which seeks to take electricity from hydropower dams in northern Quebec and carry it through New Hampshire into the regional grid. That project barely came up in the session about transmission costs, however.

Scott mentioned possible reasons for the transmission cost increase, including the large number of projects designed both to make the electric grid more robust and to expand it. He said more than 600 transmission projects of various sizes have been built in New England since 2002, with an additional 200 planned to be in service by 2019.

But he criticized what he said was lack of cost oversight on projects.

“Some of these costs are driven by fairly high equity returns and large cost overruns... From 2004 to 2008, cost overruns ranged from 30 percent to 400 percent,” he said.

Scott was critical what he called excessive use of waivers by ISO-New England, which oversees the regional power grid. These waivers allowed transmissions projects to be built without competition, partly to speed them up.

These costs are passed to rate payments through what is know as the RNS, or Regional Network Service, a cost that is shared among all six states in the New England grid.

ISO-New England has long maintained that its most important job is to keep the electric grid reliable and to avoid blackouts. Scott said it was possible this mandate had led to the grid being overbuilt in some places.

“One question I have is how much reliability do we need – that’s a hard question to have, hard discussion to have,” he said.

The third panelist in the transmission discussion was Dan Dolan of the New England Power Generators Association, an association of owners of power plants who are happy to draw attention to the cost of transmitting energy along power lines owned by utilities, rather than the cost of generating it from their own facilities.

Dolan said that New England had the lowest congestion charges in the country. These are temporary spikes in power plants’ cost of sending electricity over transmission lines, which come about when too many producers want to use the lines at once.

Dolan said the low congestion charges makes his group happy, but may be a sign that the regional grid is actually overbuilt, like a road system that never fills up because too many lanes of highway were built.

“A certain level of congestion may be economically viable,” Doland said.

Read More:

PSEG Shutting its Last Two Coal Plants in New Jersey

Powersource | October 6, 2016

Public Service Enterprise Group Inc. announced Wednesday that it would shut down its remaining two coal-fired power plants in New Jersey next year, the latest casualties as coal loses market share to inexpensive natural gas.

PSEG said it will retire its Mercer Generation Station near Trenton and the Hudson facility in Jersey City on June 1. The plants are used infrequently, and neither cleared the last two capacity auctions held by PJM Interconnection, the regional grid operator.

“The sustained low prices of natural gas have put economic pressure on these plants for some time,” Bill Levis, president and chief operating officer of PSEG Power, said in a statement. “In that context, we could not justify the significant investment required to upgrade these plants to meet the new reliability standards.”

Coal, once the workhorse fuel that powered America’s industrial growth, has been in decline in recent decades as environmental regulations became more strict and renewable energy and natural gas emerged as cleaner options. Coal now supplies about 2 percent of the electricity generated in New Jersey, down from more than 21 percent in 1997.

Mercer was opened in 1960 and has a capacity of 632 megawatts. Hudson, which started in 1968, can generate as much as 620 MW. PSEG said it was committed to treating the 200 employees “fairly” during the plant-retirement process.

“We will work with our union and PSEG leadership to ensure that the plants continue to operate safely through their retirement dates and to place as many employees as possible within PSEG’s family of companies,” Levis said.

PSEG is also evaluating all options for reusing the sites.

The retirements leave few remaining coal-fired plants in New Jersey.

The Logan Generating Plant, on the Delaware near Swedesboro, supplies steam for Ferro Corp. and electricity for Atlantic City Electric customers. Owned by subsidiaries of Ares EIF, the 225-MW plant was built in 1994 and is equipped with more modern emission controls.

In addition, Chambers Cogeneration LP operates a 261-MW plant at the DuPont Chambers Works site in Carneys Point, Salem County.

Jeff Tittel, director of the New Jersey Sierra Club, lauded PSEG for retiring its plants.

“The closing of these two plants is a turning point in our battle against dirty coal and for clean air in the entire region,” Mr. Tittel said. “With Mercer and Hudson closing, there will not be any coal plants from Trenton all the way to Maine and Jersey City to Buffalo.”

PSEG expects to book onetime charges related to the closures of $40 million to $70 million for the Hudson plant and $35 million to $77 million for the Mercer unit. The shutdowns also will result in noncash charges to earnings of $560 million to $580 million this year and $940 million to $960 million in 2017.

At the close of trading Wednesday, shares in PSEG were up 9 cents, or 0.2 percent, to $40.77.

PSEG and other merchant power generators have been expanding their capacity to generate electricity from natural gas as long-term supplies of shale gas have come into play. Much of the gas is sourced from the Marcellus Shale formation in Pennsylvania, West Virginia, and Ohio.

The company says it is investing more than $600 million in a state-of-the-art gas plant in Sewaren, N.J., as well as new plants in Connecticut and Maryland.

Read More:

Natural Gas and Oil Market Update


Natural Gas Prices Rose Slightly

The Wall Street Journal | October 6, 2016

Natural gas prices rose slightly Thursday, shrugging off government data that showed a much-larger-than-expected addition to stockpiles.

The U.S. Energy Information Administration said natural-gas stockpiles grew by 80 billion cubic feet last week, compared with the 69 bcf expected by forecasters surveyed by The Wall Street Journal. The report is a widely watched measure of supply and demand. A larger-than-expected addition to storage likely indicates greater supply or lower demand than expected.

Natural-gas futures prices settled up 0.8 cents, or 0.26%, at $3.049 a million British thermal units on the New York Mercantile Exchange. The move up reversed losses earlier in the day after the new storage data was released.


Oil Hits Four-Month Highs As Opec Keeps Talks Of Cuts In Focus

Reuters | October 6, 2016

Oil rose more than 1 percent to four-month highs on Thursday, spurred by another informal OPEC meeting on output cuts and plunging U.S. crude inventories, with some saying the market has overshot itself with a near 15-percent gain in seven sessions.

Saudi, Iranian and Iraqi energy ministers will be among key OPEC representatives to meet non-OPEC member Russia on the sidelines of an energy conference next week in Istanbul, OPEC sources said.

Oil has gained more than $6 a barrel since the Organization of the Petroleum Exporting Countries announced at informal talks in Algeria on Sept. 28 that it hopes to reduce output to 32.5 million-33 million barrels per day. That would remove about 700,000 bpd from a global glut estimated by analysts at 1.0 million-1.5 million bpd.

EIA - Weekly Natural Gas Storage Report

EIA - Weekly Natural Gas Storage Report

Working gas in storage was 3,680 Bcf as of Friday, September 30, 2016, according to EIA estimates. This represents a net increase of 80 Bcf from the previous week. Stocks were 74 Bcf higher than last year at this time and 205 Bcf above the five-year average of 3,475 Bcf. At 3,680 Bcf, total working gas is above the five-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 ($ per mmBtu)

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

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