US POWER TRACKER: ISO-NE electricity, gas prices could rise sharply this winter

ISO New England power and natural gas prices were between about 38% and 53% higher on year in September and prices declined a bit on month, but power and gas prices could significantly rise this winter, according to S&P Global Commodity Insights.

"Power prices will remain near historic levels through the rest of 2022, with on-peak prices averaging more than $105/MWh in the last four months of 2022," S&P Global power market analysts said in a recent research note.

The analysts also noted that summer wholesale power prices in New England remained at levels not seen in over a decade, supported by high gas prices.

ISO-NE Internal Hub on-peak day-ahead power prices averaged $70.95/MWh in September, about 38% higher than the September 2021 average of $51.44/MWh and about 36% lower on month as power demand and temperatures cooled.

Boston Hub on-peak day-ahead power prices averaged $71.52/MWh in September, about 36% higher on year and 36% lower on month. Real-time on-peak power prices at the hub averaged $63.22/MWh in September, which was about 29% higher on year and 39% lower on month.

Connecticut Hub on-peak day-ahead power prices averaged $69.68/MWh in September, roughly 37% higher on year and 36% lower on month.

Algonquin city-gates spot gas prices averaged $6.79/MMBtu in September, which was nearly 53% higher than the September 2021 average of $4.44/MMBtu and about 19% lower on month.

The monthly power and gas price declines can largely be attributed to lower power demand associated with cooler weather. ISO-NE peakload averaged 14,957 MW, about 24% lower than the August average of 19,666 MW and 5% lower than the September 2021 average of 15,701 MW, according to ISO data.

The average September high temperature in ISO-NE territory was 72.5 degrees Fahrenheit, which was considerably lower than the August average high of 82.4 F, according to CustomWeather data. The average September low temperature was 58.3 F, compared with an average August low of 68.5 F.

Electric heating demand began in September with an average of 1.9 heating degree days compared with zero in August, while cooling degree days declined from an average of 9.9 in August to 2.2 in September.

Power generation fuel mix

"Gas-fired generation, generally the marginal resource in New England, is affected most by the lower level of demand and increasing renewables generation," the S&P Global analysts said. "We estimate that gas-fired generation decreased by nearly 12%, year on year, in September," the analysts said in the research note.

Gas-fired power generation accounted for 54.8% of the ISO-NE fuel mix in September, down from 62.9% in August and 55.1% in September 2021, according to ISO data.

Nuclear power accounted for 28.2% of the September fuel mix, up from 23.4% in August and 27.8% in September 2021.

Hydropower accounted for 5.4% of the September power generation fuel mix, up from 4.1% in August and down slightly from 5.5% in September 2021.

Solar power provided 4% of the region's electricity in September, up from 3.8% in August and 3.0% in September 2021. And wind power also increased on month, accounting for 3.0% of the September fuel mix, up from 1.5% in August.

Forward power, gas prices

"Power prices climb significantly in Winter 2022/23 as gas supplies are challenged to meet winter heating demands and power generation needs," the S&P Global analysts said. "With fuel prices expected to eclipse $35/MMBtu in January and February 2023—wholesale power prices will continue to have substantial upside support," according to the research note.

Mass Hub on-peak power prices for October averaged $77.80/MWh in September trading, about 35% higher on year and 16% lower on month, according to Platts M2MS data. The November contract averaged $129.16/MWh in September, a nearly 70% annual increase and about 17% lower on month.

Forward power prices at the hub for December jumped to $233.48/MWh in September trading, which was about 90% higher on year and 8% lower on month.

Algonquin city-gates gas prices for October averaged $7.01/MMBtu in September trading, about 49% higher on year and 15% lower on month. The November contract averaged $12.95/MMBtu, which was about 69% higher on year and 19% lower month, while the December contract averaged $28.75/MMBtu, which was almost 102% higher on year and 12% lower on month.

"On-peak power prices in New England are projected to average over $220/MWh in January and February before falling back into double digits in the spring of 2023 as natural gas prices moderate," the S&P Global analysts said.