Suez Weekly Market Monitor
Derek Mumford ERCOT Power As we reach the end of the year, we will begin looking at new terms in each market. Please take note that Bal ’06 is now Cal ’07 and we have added Cal ‘09. NYISO—NEPOOL Power Northeast power saw a little movement this week, but nothing drastic as prices made a slight but steady climb through the week. PJM Power PJM power prices made some mixed moves last week as prices increased in the western regions but decreased in the eastern regions. Natural Gas Market Natural gas prices climbed early in the week but planed off late week. Natural Gas Storage: Gas in Storage Declines 9 BCF Working gas in storage was 3,452 Bcf as of Friday, October 27, 2006, according to EIA estimates. (Source: EIA) Competition saved New England up to $7.6 billion Electric restructuring saved New England $6.5 billion to $7.6 billion between 1998 and 2005, but it’s unclear if the trend will continue, according to a white paper by the New England Energy Alliance. Restructuring remains a work in progress, and the region’s lack of infrastructure and fuel diversity could hinder future benefits, according to “A Review of Electricity Restructuring in New England,” sponsored by National Grid, Constellation NewEnergy, Dominion Resources, Entergy, TransCanada and others. The paper called for regional planning and political leadership to improve siting and permitting. Electricity consumption has grown 15% since the markets were restructured, but it’s difficult to build new power plants and transmission because of public opposition. Among other things, a lack of new resources could make it difficult for the region to meet renewable portfolio standards. To date, New England has added only 73 MW of renewable energy, although it needs 1,000 MW by 2010. “If the goal is not met, hundreds of millions of dollars in compliance payments will be passed on to consumers with no electricity in return.” The report also warned that although investors have reacted positively, so far, to ISO New England’s forward capacity market, many details have yet to be worked out and the economic impact remains unclear. FCM, scheduled to begin later this year, is meant to spur new resource development. In addition, the balance between demand and supply for natural gas remains “tenuous” in the region. New England’s natural gas consumption increased 70% over the last decade, primarily for electric generation. The region could benefit from new nuclear facilities and clean coal, the paper said. But given the political environment and historic opposition, investment in these technologies is not likely in the near future – but should be a consideration in the longer term. Transmission investment has not kept up with the need for new facilities since restructuring, and it’s unlikely the situation would have been any better under the old rules, the report said. “The broad flow of electricity in a competitive marketplace has simply exacerbated this situation, along with transmission siting difficulties historically prevalent in the region.” Adjusted for inflation, electricity prices are 7% to 18% lower than just prior to restructuring. The savings come mostly from wholesale market performance and state-mandated rate reductions; they do not reflect recent natural gas price volatility. Massachusetts has achieved the greatest savings, $3.4 billion. Maine was at the other end of the spectrum, only breaking even since restructuring. On the wholesale level, the number of market participants in the region has increased 71%. Fifteen investorowned utilities operated the region’s plants before restructuring; now 35 companies play that role, with the largest owning no more than 15% of the region’s supply. Retail switching has taken off among medium and large commercial and industrial customers, particularly in Massachusetts and Maine. Residential and small consumers have little incentive to switch as long as electricity prices are kept artificially low or at least stable under state restructuring legislation and rulings, the report said. The white paper also noted a reduction in emissions, despite a 25% increase in electricity production. The construction of new, more efficient plants, combined with stringent environmental regulations, cut sulfur dioxide by 56%, nitrogen oxide by 57% and carbon dioxide by 22% through 2004. The NEEA was formed last year over concern about New England’s energy supply. Other report sponsors were Duke Energy Gas Transmission, Edison Electric Institute, KeySpan Energy, Nuclear Energy Institute and SUEZ Energy North America. The report was prepared by Polestar Communications & Strategic Analysis of Boston. (Source: Megawatt Daily)
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