US POWER TRACKER: PJM forward power, gas prices remain well below year-ago levels

Despite strengthening heading into the winter months, PJM Interconnection West Hub on-peak forward power prices were 46% lower in October trading than last year, and Platts Transco Non-New York forward natural gas prices were 54% lower. Spot power prices increased on the month in October at major hubs except PJM East.

PJM West on-peak power forwards for November averaged $44.02/MWh in October trading, with December forwards increasing to $52.76/MWh and January 2024 power forwards averaging $72.44/MWh, according to Platts M2MS data.

Platts Transco Non-New York forward gas prices for November averaged $2.17/MMBtu in October trading, down 61% from $5.56/MMBtu a year earlier. Forward gas for December averaged $4.23/MMBtu, down 51% on the year, and forward gas prices for January 2024 averaged $6.54/MMBtu, down 54% from $14.11/MMBtu last year.

Average delivered gas prices in October continued to remain lower on the year at around $1.10/MMBtu at the Tetco M3 price point, reflecting a well-supplied gas market, S&P Global Commodity Insights power market analysts said in the latest North American Electricity Short-term Outlook.

The analysts cited "a rapidly tightening market" as pushing forward gas prices above the $6.00/MMBtu level in January 2024, though prices in that range would remain well below year-ago levels.

While PJM anticipates a 39.8% reserve margin under normal winter operating conditions, that margin could fall to just 4.2% under extreme conditions, according to the North American Electric Reliability Corporation's 2023–2024 Winter Reliability Assessment.

Conditions like those experienced from Dec. 21, 2022, to Dec. 26, 2022, called Winter Storm Elliott, could force an additional 27.2 GW of capacity in PJM offline due to freezing and fuel issues, the assessment said.

PJM was identified as having the potential for insufficient operating reserves in above-normal conditions, with the ISO falling into the "elevated risk" category which includes nearly the entire Eastern Connection, NERC said.

Forecast peak power demand has risen while resources have changed little in PJM since Winter Storm Elliot caused energy emergencies across the area in 2022, and while PJM has adequate resources for normal winter conditions, "their generators are vulnerable to derates and outages in extreme conditions," the assessment found.

Power generation fuel mix

NERC found that PJM has the highest winter peak power generation capacity in North America at 84.9 GW but relies on gas for 47% of its winter resource mix, making the ISO vulnerable to any gas supply disruptions.

Gas-fired power accounted for 42.4% of PJM's fuel mix in October, down from 46.2% in September and 44.1% in October 2022.

Coal accounted for 12.3% of the October fuel mix, down from 13.9% in September and 12.8% in October 2022.

Nuclear power supplied most of the remainder, accounting for 35.9% of the power generation mix in October, up from 33.3% in September and 34.3% in October 2022.

Wind power, non-wind renewables and small volumes of other resources round out the PJM generation fuel mix.

Spot power, gas price dynamics

PJM power demand fell 15% on the month in October when peakload averaged 88,622 MW compared with 104,243 MW in September when temperatures and electric cooling demand were higher.

The average October temperature in PJM territory was 59.1 F compared with an average of 69.7 F in September, according to CustomWeather data.

Despite lower peakloads, spot power prices increased on the month in October at most major hubs. Northern Illinois Hub on-peak day-ahead power prices increased 9.5%, AEP-Dayton Hub on-peak day-ahead power prices increased almost 18% and PJM West on-peak day-ahead prices increased 12.8%.

PJM East Hub on-peak day-ahead power prices decreased by about 26% on the month in October.

Texas Eastern spot gas prices declined by 10% in October to average $1.24/MMBtu compared with an average of $1.38/MMBtu in September.