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New England wholesale power prices jumped 28% in 2018 due to higher gas demand

New England's average wholesale electricity prices jumped about 28% in 2018 from the year before, but 2018 still ranked the sixth lowest since its wholesale electricity markets came into being in 2003, according to new data from the ISO New England.

In a March 12 analysis, the ISO-NE attributed the increase in 2018 wholesale electricity prices primarily to the higher cost of natural gas-fired generation, especially during the first week of the year, when extreme cold weather drove up consumer demand for natural gas for heating.

Overall, the ISO-NE said consumer demand for electricity rose in 2018, with preliminary figures indicating an increase of 1.8% to about 123,344 gigawatt-hours. This jump in demand occurred in a six-state region that is becoming more dependent on natural gas imports despite increased grid reliability risks caused by pipelines being constrained during the coldest days of winter. In 2018 alone, natural gas-fired power plants generated 49% of the electricity produced in New England, or 41% of the region's total energy with the inclusion of power imports from neighboring regions.

According to the ISO-NE, the region's preliminary average annual real-time price for wholesale power in 2018 increased by 28.3% to $43.54 per megawatt-hour from $33.94/MWh in 2017, which was the second-lowest price since 2004.

New England's natural gas prices in 2018 jumped 30.1% to an average of $4.84 per million British thermal units compared with $3.72/MMBtu in 2017. The grid operator said the 2018 natural gas prices were the sixth-lowest for the region since 2004.

The ISO-NE said demand for natural gas for heating notably skyrocketed prices for both electricity and natural gas in New England during a stretch of cold weather in early January 2018 that included the "bomb cyclone."

As a result, the first week of 2018 was the costliest of the year with wholesale power prices rising to about $466 million, or just over a third of the total cost — $1.3 billion — for the entire month of January. At $107.54/MWh, January 2018's average monthly real-time power price was the eighth-highest month in the ISO-NE's competitive history. Natural gas prices during January 2018 averaged $15.37/MMBtu, the fifth-highest monthly average since March 2003.

In contrast, the ISO-NE reported that May 2018 had the eighth-lowest average real-time energy price of $23.89/MWh and the twelfth-lowest average natural gas prices since March 2003 at $2.36/MMBtu.