U.S. wholesale day-ahead power prices in early November averaged $81.21 per megawatt hour, compared to $55.72 per mwh in early November 2004, according to Platts National Daily Power Index, an exclusive measure of average benchmark prices across the nation. The year-to-year increase, driven largely by much higher natural gas prices, was even greater before day-ahead wholesale electricity prices fell 21 percent, or $21.06, from early October, when the Platts National Daily Power Index stood at $102.27.
"Natural gas prices have come down somewhat from their post-hurricane highs, and that means lower power prices," says Mike Wilczek, electric power market specialist for Platts. "The usual shoulder season price declines came late this year with hurricane damage driving up fuel costs for generation. Still, when you look at how much prices have risen since last year, it's quite dramatic."
Forward electricity prices — the prices paid currently for power to be delivered in future periods — also are up dramatically from a year ago and from the end of the summer, despite recent declines. The forward price for power to be delivered in December was $83.21 per mwh in early November, according to Platts National Forward Power Assessment, up 35 percent from the comparable year-ago price of $61.79 mwh
Increases in forward electricity prices for the coming winter are even more dramatic. For instance, prices for power to be delivered in New England for January and February 2006 stood at $179 per mwh in early November, more than double the $80 per mwh price on Dec. 30, 2004, and up $47, or 36 percent, over the Aug. 26 price of $132. Forward electricity prices for January and February are also up in all other regions of the country.
"Forward power prices, driven by natural gas prices, were already climbing earlier in the year, and then hurricanes Katrina and Rita hit," Wilczek says. "The shut-in natural gas supply caused natural gas and forward power prices to spike. Prices have come down a bit recently, but they remain very high, especially in regions where a lot of power is generated by burning natural gas.
