Dive Brief:
- Power prices will continue to spike during the winter months in the Mid-Atlantic and Northeast as long as new natural gas pipelines are not built to ease the strain on gas supplies during peak demand periods, according to a new report by competitive electricity supplier Consolidated Edison Solutions.
- Wholesale markets in the regions were hit hard this winter as the Polar Vortex caused gas supply shortages that led power prices to spike.
- During that time, some generators wound up paying far more than the annual average spot-price for natural gas to keep power plants running. As a result, electricity markets saw power prices skyrocket.
Dive Insight:
PJM Interconnection, for example, saw power prices rise up to $1,800 per megawatt-hour during the winter's peak compared to a year-long average of $64.33 per megawatt-hour.
The costs of more-expensive-than-usual generation was sometimes passed on to electricity customers. Time-variable rate customers were most badly affected by the price hikes while fixed rate customers saw the trickle-down effect of higher generation costs.
The report concluded that new natural gas pipelines will help alleviate price spikes. "Any proposed project to provide relief by reducing pipeline constraints will likely take years to complete, so consumers exposed to energy markets over the next few winters should expect higher-than-average prices during those months," the report warned. "Whether prices will be higher or lower than this winter will depend on a number of factors, including the severity and duration of cold weather."
