New England electric prices increase due to natural gas pricing, again

Increased energy costs in New England in fall 2022 were a result of higher natural gas prices, according to a report by the regional wholesale electricity market monitor. The finding continues a trend documented throughout 2021, through which high natural gas prices drive higher prices in electric energy markets.

ISO New England Inc. is the regional transmission organization responsible for operating New England's wholesale electricity markets. The ISO's Internal Market Monitor (IMM) department regularly evaluates the markets and issues reports, including quarterly and annual assessments.

Each of the market monitor's four most recent quarterly reports has noted year-over-year increases in the cost of wholesale electricity in New England -- and says the cost of natural gas explains the electricity price hikes:

Winter 2022: High natural gas prices drove an 85% year-over-year increase in the region’s wholesale market cost of electricity for the winter of 2022 ...

Spring 2022: Rising natural gas prices continued to drive up the region’s wholesale market cost of electricity in the spring of 2022, resulting in a 78% increase over the spring of 2021 ...

Summer 2022: The cost of electricity on New England’s wholesale markets in the summer of 2022 was 79% higher than in the summer of 2021 ...

Fall 2022: High natural gas prices continued to drive increases in the cost of wholesale electricity in New England in the fall of 2022 ...

The market monitor's reports show that natural gas pricing is responsible for wholesale electricity price increases, providing explanations like this one for fall 2022, "Energy market costs totaled $1.85 billion, up 13% from $1.64 billion last fall. Driving the increase was the cost of natural gas, which rose 18% compared to the fall of 2021."

The IMM's fall 2022 report documents natural gas pricing as a key driver of electricity prices:

Natural gas prices, which saw record lows in 2020 and record highs in 2021 and 2022, continued to be a key driver of energy prices. The Fall 2020 natural gas price ($1.93/MMBtu) was the lowest fall price since 2001, while the Fall 2022 natural gas price ($6.00/MMbtu) was the highest fall price since Fall 2008.

2022's year-over-year price increases follow a 2021 in which New England’s average wholesale energy prices rose to their highest levels in seven years in 2021. According to the 2021 annual report by ISO-NE's IMM, 2021's high prices too were caused by natural gas pricing:

High natural gas prices drove higher prices in the energy markets, leading to a 38% year-over-year increase in the total wholesale market cost of electricity, which rose from $8.1 billion in 2020 to $11.2 billion last year. The increase followed record-low energy prices recorded during the first months of the COVID-19 pandemic.

In addition to playing a significant role in setting the price of electricity in the regional energy market, natural gas also plays a major roles in regional electric reliability, according to ISO-NE:

During the last few years, inadequate infrastructure to transport natural gas has at times affected the ability of natural-gas-fired plants to get the fuel they need to perform. This energy-security risk has become a pressing concern in New England, considering the major role natural-gas-fired generation plays in keeping the lights on and setting prices for wholesale electricity.

According to ISO-NE's resource mix documentation, in 2022 natural gas provided 52% of wholesale electric generation in New England, and supplied the energy serving 45% of New England load.