Monday, March 23, 2015
U.S. energy markets overseen by the Federal Energy Regulatory Commission in 2014 were impacted by extreme weather and changes in the mix of electric generation resources, according to a report by Commission staff.
The 2014 State of the Markets report issued on March 19 by FERC's Office of Enforcement’s Division of Energy Market Oversight presents Commission's staff’s assessment of recent developments in natural gas, electric, and other energy markets.
Extreme cold temperatures in the first quarter of 2014 affected natural gas infrastructure and power markets across the country. The price of natural gas in the U.S. reached record high levels, driving corresponding spikes in the price of electricity. For example, the price of natural gas at the Transco Zone 6 Non-NY pricing point hit $123/MMBtu in January -- about 33 times higher than the average 2013 U.S. price. Largely due to these price spikes, the spot natural gas price at the Henry Hub pricing point averaged $4.32/MMBtu in 2014, a 16% increase over 2013.
Meanwhile, natural gas and renewable resources continued to displace coal as a fuel for electric power generation. Total U.S. generating capacity increased 10.8 GW in 2014, with natural gas and renewable projects representing the bulk of new capacity. At the same time, utilities retired coal-fired power plants, continuing a trend that started in 2012. Commission staff projects continued coal retirements in 2015, particularly after the April effective date of additional air emissions regulations imposed by the Environmental Protection Agency's Mercury and Air Toxics Standards.
FERC's 2014 State of the Markets report also provides a quick look at 2015 year-to-date market performance. Wholesale electricity prices rose again this winter, although not as sharply as in the first quarter of 2014. FERC staff's report suggests factors helping to moderate winter prices included better cold-weather preparation of assets, programs like ISO New England's Winter Reliability Program, better coordination between operators of electric transmission and natural gas pipelines, record high levels of natural gas production, the development of new pipeline infrastructure, and low oil prices.