EnergyWindow MarketElert ^TM - November 2003
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November Elerts

	Virginia: Dominion Virginia Power is soliciting enrollment for a retail access pilot from November 15 - December 15. Accounts with greater than 30 kW peak demand that want to participate in the C&I direct access pilot will enjoy increased incentives, but enrollment is limited to 200 MW. The Pilot is slated to run from early 2004 to mid-2007. More information from the Virginia State Corporation Commission is available at http://www.state.va.us/scc/caseinfo/pue/case/e030118.pdf or from an expanded EnergyWindow article at http://www.energywindow.com/MarketElert/200311-VA.shtml.
	Oregon: The annual enrollment period for customers of Pacific Power and Portland General Electric to choose a cost-based rate, market-based utility price or direct access (competitive retail electric supplier) is Nov 17 - 24. More details available at http://www.pacificpower.net/Navigation/Navigation4719.html and http://www.portlandgeneral.biz/PricingPlans/Default.aspx.
	New Jersey: The BPU is considering voluntary participation in hourly, spot-market based pricing for C&I customers rather than making it mandatory for >750kW customers, (as it already is for the state's roughly 1600 largest customers). The decision has been postponed until the next BPU meeting (11/17) with comments due out on 11/7. More at http://www.bgs-auction.com/.

The Impact of Gas Prices on Electricity

The relationship between natural gas prices and the wholesale price of electricity is easy to understand in regions where natural gas is the predominant generation fuel, such as ERCOT (64% gas generation) or California (46% natural gas). But why do gas prices have such a profound effect in regions where gas generation forms a minor portion of the available capacity, such as PJM (19%), NYISO (25%), ISO-New England (29%)? In these markets, hourly wholesale electricity spot prices are determined by dispatching the lowest priced generation that is available to satisfy hourly load requirements. All successful bidders for each hour earn the same price as the last unit required, called the marginal unit. When demand reaches levels above the amount able to be served by coal, nuclear and hydro baseload units, bids from natural gas units set the hourly wholesale prices.

The EIA predicts that gas-fired generation will increase from 17% to 29% of total generation by 2025. As the percentage of natural gas-fired generation increases versus lower cost units, market prices will increasingly be driven by natural gas prices. The graph above shows the tight correlation between NYMEX PJM electricity and the NYMEX Henry Hub 12-month strips plotted over time. The average Henry Hub price of natural gas during the year ending March 31st, 2003 was $4.78/MMBTU. The current NYMEX 12-month forward strip price is about $4.90/MMBTU.

Projections of gas prices into the future vary widely, and will be impacted by such things as national legislation freeing up or denying use of new fields, development of LNG facilities, the economy, demand for natural gas to generate electricity, the degree of new baseload plant construction and the rate of retirement of older or uneconomic units.