Grid Operator: Wholesale Electric Prices Fall In May
First the good news: New England's regional grid operator is reporting that wholesale electric prices in May fell by nearly 10 percent from where they were in April. The average real time price for electricity for May was $38.46 per megawatt hour, down 9.9 percent from a month earlier, ISO-New England said this week.
Okay, now the bad news: Wholesale electric prices in May were still 37.4 percent higher than they were in May 2012.
ISO-NE officials say the two main drivers of wholesale electric costs are consumer demand and the cost of fuel used to produce the power.
And while the average price of natural gas fell by 35 percent in May, the fuel is still 81 percent more expensive than it was at the same time a year ago. Demand for electricity in May was at 9,822 gigawatt hours, down 2.2 percent from where it was a year ago, according to the Holyoke, Ma., grid operator.
A gigawatt hour of electricity can power about 1 million homes for an hour.
You can look at these numbers two ways.
One is that New England in May was only three months removed from its 10-year peak in average natural gas prices. With increased supply coming out of the Marcellus Shale deposits, the cost of the fuel can only go down.
But let's not forget the role that weather and other factors play in the price of natural gas and electricity.
The fact that the 10-year high occurred in the midst of the glut of fuel from Marcellus Shale suggests to me that perhaps estimates of how far the cost of natural gas and of electricity can fall are a tad optimistic. And with gas fired power plants accounting for 46 percent of the electricity generated in New England in May, all it would take is a long hot summer hot summer - or a hiccup in the region's natural gas supply - to eat away at those modest steps toward lower energy costs in the regions.
Look, I'm not an economist: Take my assessment for what you will. But when it comes to predictions made by state government officials that we're in for years of decreasing energy prices, don't believe the hype, either,