Electric wholesale prices to rise by 9 times overall since end of Winter 2014
We ask “what is going on with electric prices?”
PJM is essentially the wholesale market for electricity in ComEd. They will request bids from generators (electric generator owners) every year for the next three years. PJM issued a press release announcing the results of their most recent auction.
The press release shares some interesting highlights such as “increased diversity” even though they acknowledge the trend to more gas-fired generation.
However, the bigger issue is that the cost of the bids increased dramatically over the next year, rising from $27.73 in 2014 to over $136 by the end of 2015. This nearly 900% increase will be passed thru to all retail customers. We have already seen about 50% of this increase.
This projected increase does NOT appear to be directly related to the winter “vortex” of 2014. However, given the timing of PJM’s bid (just after winter) and the trend to more gas-fired generation, some link shouldn’t be dismissed. Last winter reminded energy traders, power generators, utilities, and energy marketers of the extent of their reliance on certain pipelines. The demand on these pipelines is increasing (by both gas-fired electrical generation and through population growth). Therefore, as the wholesale price increases, we will be starting at a higher price next winter. If winter or summer weather spikes, we could see even greater pricing than last winter.
Realgy offers fixed pricing to reduce the effect of seasonal weather by offering a winter or summer fixed price. This allows our customers to avoid paying a premium for a fixed price when they don’t have to. Please call your Energy Broker or see our PriceWatchTM service at http://realgyenergyservices.com/request-for-service/pricewatchtm/
Read the full PJM press release, “PJM Capacity Market Secures New And Diverse Resources To Meet Future Electricity Demand”.
PJM Backs Duke’s $9.8M ‘Stranded Gas’ Claim
And now the lawsuits over winter’s Polar Vortex 2014 begin. Much like this winter (coldest in 22 years), this is a unique circumstance and would be record-setting.
The players:
PJM—the regional authority that calls on power generators to meet expected and actual electric (power) demand (PJM could represent any utility that was affected).
Duke—owns generation plants (this could be any energy marketer serving customers).
Duke Lee Energy Facility (Source: Bill Spindler, SouthPoleStation.com)
FERC—the federal government overseeing wholesale interstate markets (this of as the referee).
Like all power suppliers when the utility (in this case PJM) called for more power to meet the record demand for electricity (natural gas) the generators had to respond. Duke went out and bought natural gas to generate the electricity but didn’t get paid enough from the electricity (or reselling the natural gas) to cover its cost (plus profit). Therefore, it wants to recover the cost from PJM (think all of us).
Duke is not unique. Every utility did this to every supplier during this winter. Whether it was gas or electric, it worked the same. The utility called for more and the marketers had to respond.
The idea that we (Realgy) could go back to one of the utilities that requested more gas/electricity such as NICOR, Citizens, COMED, Consumers, etc. and say that you asked us to bring more but we didn’t get paid enough so please make up the difference—well it’s laughable. However, Duke thinks it’s not!
Realgy Energy Services is an energy marketer of natural gas and electricity in Illinois, Indiana, and Michigan. We provide direct service without a utility mark-up behind 12 utilities. To learn how much we can save you and the benefits of Customer Choice please see www.realgyenergyservices.com.
Read the whole ROT Insider article, “PJM Backs Duke’s $9.8M ‘Stranded Gas’ Claim”
PJM Statement on Winter 2014 Cold Weather Events
The following is a press release from the Pennsylvania-New Jersey-Maryland (PJM) power pool. You question; what does it mean to me? In a word; a law suit!
As the press release explains; winter caused price spikes for marketers and power plant operators which was passed through to our customers. Energy marketers (Realgy) and power plant operators had to buy natural gas at the settlement and spot prices imposed by utility and pipeline operators. In many, many cases the utility settlement procedures imposed record setting prices.
This communication is a warning; the costs that Realgy incurred and passed through as a result of this winter’s weather will be with us a long time as they get examined. FERC may get involved to understand how the prices got so high and if they were appropriate.
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PJM Statement on Winter 2014 Cold Weather Events
Due to unprecedented cold weather conditions during the winter of 2014, PJM has been apprised of specific operational and gas procurement challenges which certain members faced during the extreme cold weather. The information gleaned from members’ operational experiences as well as PJM’s own examination of system conditions will enable PJM to share with stakeholders lessons learned from these events and allow for stakeholder review of possible improvements to PJM’s processes and market rules in this area.
Specifically, PJM has learned that several members may have incurred significant gas balancing losses in the course of operations during these unprecedented cold conditions.
Where appropriate, PJM credits members for costs incurred and allocates the associated costs according to the terms and conditions of its governing documents, as augmented via recent FERC approval of the waivers filed in dockets ER14-1144 and ER14-1145. That being said, PJM is aware that some members incurred losses for which they cannot be compensated under the current terms of PJM’s governing documents. As a result, PJM expects that some of these members may elect to make filings with the FERC in order to seek compensation for losses they incurred.
PJM plans to intervene in some or all of these proceedings. Although the burden of proof to establish the just and reasonable nature of the specific cost levels rests with the petitioning member, PJM is prepared to provide detail to FERC regarding the extraordinary conditions which caused an individual member’s cost incurrence, including the underlying conditions that gave rise to the need for a particular unit to be available to run during portions of the cold weather conditions on certain days during the winter of 2014.
In response to “How ComEd’s rate design benefits suburbs over the city”
Written by Michael Vrtis, President of Realgy Energy Services in response to Crain’s article “How ComEd’s rate design benefits suburbs over the city”
ComEd is one member of a larger group of utilities called PJM. Each utility that makes up the power pool of PJM sets how its own method of collecting the costs of running the power plants and transmission lines. This makes the PJM pool a low-cost producer with great reliability.
PJM has notified its members (who voted for it years ago) about his change.
ComEd can allocate capacity costs in any manner it wishes; however, ComEd chooses not to change its collection approach which has stayed the same for more than 20 years.
ComEd doesn’t need smart meters to make this change, it needs smarter policy.
Allocating capacity based on aggregate demand of the load center serving a municipality is possible as well as more equitable than the broad and out-dated policy of ComEd.
Realgy already operates under PJM capacity allocation rules and we will continue to be the residential and business choice where energy is all about price, information, and service.
Check out Crain’s article: “How ComEd’s rate design benefits suburbs over the city”