New England wholesale electricity market report 2016

Monday, June 12, 2017

Overall, the New England wholesale electricity markets performed well in 2016, according to a report by the grid operator's internal market monitor.

ISO New England, Inc. operates the bulk transmission system and wholesale electricity markets for most of New England.  ISO-NE's Internal Market Monitor is an internal ISO department charged with performing regular market assessments and reporting, as well as "the daily detection and mitigation (lessening) of the effects of any anti-competitive behavior in the wholesale markets or market products."

The market monitor released its most recent report last month.  According to the Internal Market Monitor's 2016 Annual Markets Report, the total wholesale cost of regional electricity in 2016 was $7.6 billion.  Compared to 2015, the total wholesale cost in 2016 dropped 18%, or by $1.7 billion.  According to the report, this was due to the decline in energy costs "which continue to be driven primarily by natural gas prices."
Figure 1-1, 2016 Annual Markets Report.

The report also noted that "wholesale costs to date have been influenced by low capacity market prices that ranged from $2.95 to $4.50/kW-month."  Based on the results from Forward Capacity Auctions 8 through 11, "low capacity prices will continue until the 2017-18 capacity commitment period (associated with the eighth forward capacity auction, or FCA 8) when capacity market prices will increase, reflecting the end of a period when the New England system was structurally long on capacity."

According to the report, both the Forward Capacity Market and the energy market "exhibited competitive outcomes despite the presence of structural market power."

At the same time, the report notes an increase in transmission costs:
Transmission costs totaled $2.1 billion in 2016. Both costs and the regional transmission rate increased by approximately 6% in 2016 over the 2015 rate, moving from $98.07 per kW/yr to $103.30 per kW/yr.
The report attributes the increase to "investment in new regional transmission infrastructure to address deficiencies in meeting reliability criteria, as well as investment to address deficiencies in the condition of existing regional transmission assets."

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