The Energy Research Council's (ERC's) weekly average power price benchmarks for small to medium customers in restructured states moved up last week, driven by a surge in Texas and higher natural gas prices. The national average rose 0.63% to 7.64¢/KWH.
"All of the other states are fractional increases. The real increase is in Texas," ERC President James Moore told us yesterday. "Last week it popped another 5.64% and it actually brings Texas to a point where they have increased prices over 30% since the beginning of the year."
ERCOT's energy-only market is going into a summer with a reserve margin below the one-event-in-10-years industry standard for the first time. The region already saw some capacity come back online due to high forward prices as ERCOT raised its reserve margin expectation to 11% from 9.3% this summer in its most recent report (PMT, May-1), which also had a slightly lower peak demand forecast.
But prices shot up over the past month in ERCOT and last week the 5.64% boost came as the grid operator set new demand records for May last week and wholesale prices briefly spiked to $1,500/MWH Wednesday afternoon. The price spike last week was transitory but given the tight conditions after about 40% of ERCOT's coal fleet, and a large gas plant, retired – the market is expecting more scarcity pricing to come this summer, Moore said.
The average price in Texas is now 5.7¢/KWH, which is above both Ohio and Illinois. But the retail market does seem to be counting on more capacity coming online in the out years as the price for a 12-month contract is the highest at 6.1¢/KWH and every other 12-month increment drops all the way down to 4.87¢/KWH for a 60-month deal.