New England wholesale electricity market cost increased in 2018

New England's wholesale electricity markets operated at a total cost of $12.1 billion in 2018, an increase of about 32% over 2017, according to a recent report by the regional grid operator.

On May 23, 2019, the Internal Market Monitor for regional transmission organization ISO New England Inc. issued a report on the state of competition in the wholesale electricity markets operated by ISO-NE, covering the 2018 calendar year. According to that report, "Overall, the ISO New England capacity, energy, and ancillary service markets performed well and exhibited competitive outcomes in 2018." In general, the market monitor found that electricity prices reflect changes in underlying primary fuel prices and electricity demand, with relatively few periods of scarcity pricing.

However, the market monitor noted that the "total wholesale cost of electricity in 2018, at $12.1 billion, was considerably higher than 2017, increasing by 32%, or by $2.9 billion." The total cost equates to $98 per megawatt-hour of wholesale electricity demand, the highest over the past 5 years.

Nearly all of this overall increase -- 98% -- is accounted for by increased energy and capacity costs. Specifically, energy costs rose 34% (or $1.5 billion) to $6 billion, driven by higher natural gas power prices and higher power summer demand. Capacity costs rose by 61% (or $1.4 billion) to $3.6 billion, following higher capacity auction clearing prices in the wake of significant generator retirements.

Other major cost components include regional network load costs. These fees for the use of transmission facilities and other services reached $2.3 billion (an increase of about 2% relative to 2017), and reliability services added another $200 million in 2018.