Natural Gas Fuels Increase in Power Prices

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Published January 08, 2014

| FOXBusiness

Higher spot natural gas prices helped fuel an increase in electricity prices last year, with supply and demand issues particularly affecting New England and the Pacific Northwest.

According to the Energy Information Administration, average wholesale, on-peak power prices were higher across the country in 2013 and jumped the most in the Pacific Northwest, which is typically among the least expensive areas.

The Pacific Northwest typically benefits from a regional concentration of hydroelectric generation and its low operating cost. But last spring was drier than the previous two years, elevating power prices there.

Like the rest of the nation, the Pacific Northwest was also impacted by colder-than-normal temperatures in December that led to short-term spikes in natural gas and power markets. The EIA said 5% of the year-over-year increase in power prices is attributable to the price spike last month.

Those cold temperatures continued into 2014, with record lows pushing natural gas demand to all-time highs. On Tuesday, the EIA released a report detailing pipeline constraints into New York and from the west and south into New England.

Spot prices for natural gas scheduled for delivery the next day have soared. In New York City, day-ahead spot prices checked in at $12.83 per million British thermal units for the weekend before jumping to $47.80 per mmBtu on Monday.

In New England, cold weather also strained natural gas pipeline infrastructure early last year. Prices spiked in both the natural gas and power markets in January and February 2013, before climbing again in late November and early December.

Other markets like Texas benefited from a cooler-than-normal August. Texas had the lowest increase in 2013 power prices.

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