New England winter electricity costs decreased

New England's total estimated wholesale market cost of electricity in winter 2020 was 32% lower than during the previous winter, according to the ISO New England Internal Market Monitor, largely due to lower costs for electric energy and capacity and low natural gas prices. According to a recent report, one effect was that oil-fired generators in New England were "uneconomic, on average, every day during Winter 2020."

On May 4, 2020, ISO New England’s Internal Market Monitor released its Winter 2020 Quarterly Markets Report, assessing the state of competition in the ISO-NE wholesale electricity markets during the period from December 1, 2019 to February 28, 2020. According to the Winter 2020 Quarterly Markets Report, the total estimated wholesale market cost of electricity in Winter 2020 was $1.78 billion. This cost represents a 32% reduction relative to last year's total estimated wholesale market cost of $2.59 billion.

Breaking the total costs down into energy, capacity, and other components, the report notes that regional wholesale energy costs totaled $1.01 billion, a 36% reduction relative to Winter 2019 costs as "a result of lower natural gas prices, which decreased by 41% relative to Winter 2019 prices." Capacity costs totaled approximately $751 million, a 24% reduction relative to Winter 2019. This reduction was driven by lower capacity clearing prices from the tenth Forward Capacity Auction which began contributing to to lower wholesale costs in summer 2019, with capacity payment rates generally falling from $9.55/kW-month in all capacity zones except Southeastern Massachusetts/Rhode Island, to $7.03/kW-month. (Future capacity payment rates, determined earlier this year through the fourteenth Forward Capacity Auction, will fall even further to $2.00/kW-month.)

The report also cites warmer weather, an absence of cold spells, and "historic lows" for natural gas prices at supply basins: "Henry Hub natural gas prices averaged $2.03/MMBtu, the lowest average winter price since at least 2005. Together, the warmer New England weather and lower supply basin prices led to the lowest average winter New England natural gas prices for,at least,the past 10 years." According to the report, low regional natural gas prices contributed to lower prices for electric energy, "which caused oil-fired generators to be uneconomic, on average, every day during Winter 2020."