ISO New England tracker: May power prices rise with demand, gas prices

ISO New England power prices increased at major hubs by over 50% on the year in May due to higher power demand, natural gas prices and temperatures, but power and gas prices decreased monthly from April.

ISO-NE peak power demand increased by 5% on the year in May, rising from 12,734 MW in May 2020 when the region was experiencing reduced loads due to pandemic-related lock downs, to 13,402 in May 2021, according to ISO data.

Power demand was up moderately month over month, with April peak demand averaging 13,145 MW.

"Raw load in New England posted 5% year-on-year growth in May, with warmer weather and coronavirus-related recovery driving growth relative to 2020," Kieran Kemmerer, power market analyst with S&P Global Platts Analytics, said in a recent research note.

"Weather-adjusted load growth for April was estimated near 2% year on year, with larger growth seen regionally in Western Massachusetts and Maine," Kemmerer said.

Regional monthly average temperatures increased 22% month over month in May, rising from an average of about 48 degrees Fahrenheit to 59 degrees F, according to CustomWeather data.

Average heating degree days dropped to zero from nearly 16 in April as cooling degree days started kicking in.

Spot power, gas prices up on year

ISO-NE Internal Hub day-ahead on-peak power prices increased by a little over 53% on year in May and day-ahead off-peak prices at the hub increased by about 48%, according to ISO data. May day-ahead on peak averaged $26.83/MWh, up from an average of $17.51/MWh in May 2020.

Internal Hub day-ahead on-peak power prices declined by 4% monthly from April to May.

Day-ahead on-peak power prices at the Boston Hub increased 53.84% in May on year, while day-ahead on-peak prices at the Connecticut Hub rose by 53.36% from May 2020.

Algonquin city-gate natural gas prices increased 66% on year in May, averaging $2.31/MMBtu compared with $1.39/MMBtu in May 2020. Algonquin spot gas prices were down nearly 1% monthly in May.

Fuel mix changes

"Year-on-year growth in load was met with an increase in gas-fired generation as well as nuclear (resulting from lower outages relative to 2020)," Kemmerer said.

Gas-fired power generation supplied 43.6% of the ISO-NE electricity supply in May, up from 41.4% in May 2020. On a monthly basis, gas-fired power increased from 40.7% of the fuel mix in April.

Nuclear power generation accounted for 32.6% of the New England power supply in May, up from 27.9% in May 2020 and down from 33.8% in April.

Power, gas forward prices

Mass Hub on-peak power forward prices for June increased by less than 1% on month, but were up 33% from May 2020 trading, according to Platts M2MS data. June forward power prices averaged $29.50/MWh, up from the year-ago package that averaged $22.25/MWh.

Forward power prices increased further along the curve, with July averaging $39.09/MWh and August averaging $37.03/MWh. The Mass Hub July forward package was up 44% from May 2020 trading and August forward power prices at the hub were 40% higher than year-ago levels.

"Despite the call for lower loads, on-peak prices at Mass Hub are forecast to post a substantial year-on-year increase relative to 2020 through September," Kemmerer said.

"Still, our forecast for July/August on-peak prices falls short of market forwards which exhibit a $5/MWh premium," he said.

Forward gas prices at Algonquin city-gate increased by similar levels to the power forwards, with the June package averaging 31% higher in May trading than a year ago. June forward gas prices averaged $2.34/MMBtu compared with $1.79/MMBtu last year.

The July forward gas price package was 52% higher and August was 44% higher than last year during May trading.

"Looking ahead to winter 2021-22, on-peak power prices reach as high as $65/MWh in January," Kemmerer said.

"With gas prices forecast near $7/MMBtu, we anticipate coal-fired generation to be firmly in-the-money and dispatched at levels near those seen in winter 2020-21 despite slightly lower loads," he said.