Wholesale electricity prices drop to 13-year low
Cheap natural gas and lower demand cause price to fall
New England’s wholesale electricity prices plunged to their lowest level in 13 years in 2016, propelled by cheap natural gas and lower consumer demand for power.
The operator of the region’s power grid, ISO New England, said the average wholesale price of electricity was $28.94 per megawatt hour in 2016, down 29.4 percent from the year before. The next lowest level in the last 13 years was in 2012, when the price was $36.09 per megawatt hour. The total value of the wholesale electric market was $4.1 billion in 2016, down 30 percent from 2015 and well below the $5.2 billion value in 2012.
Wholesale prices are what power generators receive for the electricity they feed into the grid. Consumers pay a higher retail price that includes charges for transmission, distribution, energy efficiency, and customer fees. Still, lower wholesale prices typically translate into lower retail prices.
ISO New England said wholesale electricity prices fell in 2016 primarily because the price of natural gas, the dominant fuel used by the region’s power plants, dropped to its lowest level since 1999. Helped along by warmer-than-usual weather and energy efficiency efforts, demand for electricity also fell 2.1 percent in New England during 2016.
Gordon van Welie, the president and CEO of ISO New England, said the region’s wholesale prices are heavily dependent on the weather. “When New England’s natural gas power plants can access low-cost fuel, wholesale power prices tend to remain low,” he said in a statement. “By comparison, extremely cold temperatures three winters ago resulted in pipeline constraints and caused natural gas – and wholesale electricity – prices to hit record highs. January and February 2014 still stand as the two highest-priced months for wholesale power in New England.”