FERC 2014 State of the Markets report

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.

FERC and EPA's Clean Power Plan

Following the U.S. Environmental Protection Agency's 2014 proposal to regulate carbon emissions from electric power plants and other major sources, federal energy regulators have scheduled a series of public technical conferences on how the Clean Power Plan may affect electric reliability, wholesale electric markets and operations, and energy infrastructure.

On June 2, 2014, the U.S. Environmental Protection Agency announced the Clean Power Plan, its proposed rule under Section 111(d) of the Clean Air Act to reduce carbon emissions from the nation's power plants.  Designed to reduce carbon emissions 30 percent below 2005 levels by 2030, EPA's proposal would impose limits on each state's rate of carbon emissions per megawatt-hour of electric energy generated.

The Federal Energy Regulatory Commission regulates the transmission and wholesale sales of electricity in interstate commerce, monitors energy markets, and protects the reliability of the high voltage interstate transmission system.  Acting out of concern over the possible impacts of the EPA Clean Power Plan on its regulated sector, on December 9, 2014, the Commission scheduled a series of technical conferences to develop public comment on these issues.

First, the Commission will hold a National Overview technical conference on February 19, 2015, at its Washington, DC headquarters.  Earlier this month, the Commission issued a supplemental notice describing the agenda for the National Overview.  After an introduction by EPA, the Commission expects to discuss:

• Electric reliability considerations: How will the Clean Power Plan affect electric reliability?  How can the U.S. sustain reliability as states and regions develop their plans to comply with the proposed carbon rule?  How could state, regional, and federal plans for compliance affect grid operations?  What tools are available to identify potential reliability impacts?  How can reliability planning processes and compliance planning efforts  coordinated to address potential issues?  What is the Commission's role in this area?
• Identifying and addressing infrastructure needs: What potential infrastructure needs may arise from various state or regional compliance approaches?  How can any infrastructure needs met in a timely manner in order to ensure system reliability?  How can relevant planning entities, industry, and states coordinate reliability and infrastructure planning and siting processes with state and/or regional environmental compliance efforts to ensure the adequate and timely development of new infrastructure?  Are additional mechanisms needed to ensure timely development of new infrastructure? Are adaptations to current Commission policies needed to facilitate the infrastructure needed for compliance with the proposed Clean Power Plan?
• Potential implications for Commission-jurisdictional markets:  How could potential compliance approaches to the proposed Clean Power Plan impact Commission-jurisdictional electric and natural gas markets?  What aspects, if any, of the wholesale and interstate markets would facilitate implementation of state or regional compliance plans?  What tools are available to address market issues as they arise?  What opportunities are available to coordinate compliance approaches with Commission-jurisdictional markets to meet the requirements of the proposed Clean Power Plan rule?

Following the National Overview, the Commission has scheduled three regional conferences in February and March 2015.

FERC reports on 2012 electricity, natural gas markets

The Federal Energy Regulatory Commission has released its 2012 State of the Markets Report.   The 77-page document reviews developments and trends in U.S. electricity and natural gas markets.  Trends highlighted in this year's report include the replacement of coal for electric power generation with natural gas, decreased prices for natural gas and electricity, and reduced demand for electricity.

The report's findings include:

• Record natural gas pricing led to lower natural gas prices.  In 2012, driven by the increase in shale gas production, domestic production of natural gas reached a new record.  As a result, natural gas prices reached 10-year lows throughout most the nation.  For example, the spot price at Louisiana’s Henry Hub averaged $2.74/MMBtu for 2012, a 31 percent decrease from 2011.


• Electric generators relied on natural gas instead of coal.  As a result of the low natural gas prices, combined with tighter environmental regulations, natural gas's share of electricity production rose to 31 percent in 2012.  Meanwhile coal-fired power generation fell to its lowest level in 30 years -- just 39 percent of total generation.


• Electricity demand fell.  The nation consumed 1.7 percent less electricity in 2012 than 2011.  This reduction amounted to 62.9 TWh in 2012.  The report attributes the decrease in demand to three primary factors: a decrease in residential demand, lack of demand growth in the commercial and industrial sectors, and increased energy efficiency.


• Electricity prices declined due to lower-cost natural gas and reduced demand.  Because natural gas typically represents the marginal fuel in electric generation, reducing the price of natural gas usually reduces the wholesale price in electricity markets.  Generally speaking, Eastern prices were between 1 percent and 31 percent lower than in 2011 while Western prices fell between 6 percent and 23 percent.  Likewise, reductions in the demand for electricity due to a relatively warm winter, economic trends and increased energy efficiency contributed to lower electricity prices in 2012.