ANALYSIS: NYISO forward power, gas prices strengthen heading into winter

New York Independent System Operator power prices at major hubs mostly decreased on the month in September with lower temperatures and power demand, while spot and forward natural gas and power prices significantly increased in the month from year-ago levels.

NYISO Zone G day-ahead on-peak locational marginal power prices averaged $49.81/MWh in September, which was down slightly on the month, but more than 150% higher than the September 2020 average price of $19.88/MWh.

Zone G day-ahead and real-time off-peak power prices were 13% and 12% higher, respectively, in September on the month, while annually, power prices at the Hudson Valley hub were 152% and 158% higher than year-earlier levels.

NYISO Zone J New York City day-ahead on-peak power prices followed a similar pattern with September averaging 149% higher than a year earlier and the average price declining slightly on the month.

NYISO Zone A day-ahead on-peak power prices averaged $43/MWh in September, which was a 134% increase from September 2020.

Transco Zone 6 September spot natural gas prices averaged $4.27/MMBtu, surging 243% from the September 2020 average price of $1.25/MMBtu.

"Power prices (particularly downstate) remained elevated, while upstate Zone A on-peak finished at a near $15/MWh discount on account of significant Central East congestion," S&P Global Platts Analytics said in a recent research note.

"We, like the market, anticipate continued Central East congestion to keep Zone A prices at a discount to downstate price hubs," the analysts said.

The average high temperature in September across NYISO territory was 75 degrees Fahrenheit compared with an average high of 82.7 degrees in August, according to CustomWeather data.

Typically, a shoulder season month between summer and winter high demand periods for power, September had 1 heating degree day and 4.2 cooling degree days. By comparison, August had zero HDD and 10.7 CDD.

Average NYISO peak power demand was 20,266 MW in September, down from the August average peak of 24,858 MW, according to ISO data. Peak load averaged 19,595 MW in September 2020.

Power generation fuel mix

Natural gas-fired generation accounted for 24.8% of the NYISO fuel mix in September, down slightly from 25.9% in August, and dual fuel generators that can run on gas or a backup fuel like oil supplied 24.4% of the generation mix in September, compared with 32.2% in August.

Nuclear power output was up slightly in September on the month, supplying 24% of the region's power compared with 19.3% in August.

Hydropower supplied 21.7% of the generation mix in September, up slightly on the month, and wind power supplied 3.3% of the fuel mix in September compared with 1.5% in August.

Forward power, gas prices

Forward NYISO power prices have been increasing on a monthly and annual basis with the October on-peak Zone G contract averaging $49.62/MWh in September trading. Further along the curve, November Zone G averaged $60.68/MWh and Zone G December averaged $82.88/MWh in September trading, according to S&P Global Platts data.

Zone G October on-peak power prices were up 145% on the year and 22% on the month in September.

Zone J on-peak power forwards followed a similar pattern, with the December contract averaging $87.64/MWh in September, which is 107% higher than a year ago and 25% higher on month.

NYISO Zone A on-peak forward power prices have been lower than the southern hubs, with the December contract averaging $50.38/MWh in September, which was 55% higher on the year and 30% higher on the month.

Transco Zone 6 on-peak forward gas prices have also been rising heading into winter, with the October contract averaging $3.69/MMBtu in September. The December contract averaged $6.70/MMBtu in September trading.

"Forwards currently call for a $10/MWh Zone J-Zone G premium in January -- one that is likely to be challenged by the pull of exports to premium markets in New England," Platts Analytics said.

"Moving beyond the upcoming winter, we call for power prices to move higher alongside an upward revision to gas prices," the analysts said, adding "gas-fired generation remains at relatively similar levels to support exports to New England through the balance of the year."