PJM Interconnection power prices in the first half of 2014 were the highest since 2008, a new report shows, but industry observers expect the price extremes experienced in the first quarter are unlikely to be repeated soon.
"The state of the PJM markets in the first six months of 2014 reflected the extreme winter weather conditions in January and a return to more typical weather conditions in the second quarter," states the State of the Market Report for January through June, released Thursday by Monitoring Analytics, PJM's independent market monitor. "The energy market reflected the combination of increased, weather-related demand and higher fuel costs in higher energy market prices."
The load-weighted locational marginal prices averaged $69.92/MWh in the first six months, compared with $37.96/MWh for the same period of 2013. Since 1998, the only previous time the load-weighted average LMP for the first six months have exceeded that number is 2008, when it hit $74.77/MWh, the report states.
Although the extreme highs in the first half of 2014 occurred in the first three months, load-weighted average LMPs this April, May and June also exceeded the corresponding averages for April, May and June 2013, PJM staff market reports show.
"I do not know if prices will continue to go down, but obviously do not expect them to return to [the] height of the first quarter without extreme weather conditions," said Marji Rosenbluth Philips, Direct Energy director of regional transmission organization and federal services, in an email Thursday.
Regarding the present quarter, Dan LoBue, president of Competitive Energy Consulting, said, "Summer has been extremely soft with the below- and well-below-normal temperatures for the entire Eastern Interconnection, not just PJM."
LoBue has been working with clients to optimize generation offer curves, trying to "extract whatever margins that could be obtained since pricing has been very competitive," he said in an email, adding that he is "seeing shorter schedules and tighter margins on market-committed combined-cycle [units] and combustion turbines than in a typical summer."
Another extraordinary set of numbers in the State of the Market Report concerns congestion costs, the report notes, jumping from about $306 million in the first half of 2013 to about $1.1 billion in the first half of 2014.
"Total congestion costs increased because of the cold weather in January 2014, but congestion was also much higher in March 2014 than in March 2013, and congestion was higher in each of the first six months of 2014 than in the first six months of 2013," the report states.
The AP South Interface, near the borders of Maryland, Virginia and West Virginia, contributed the most during the period, $455.4 million in the first six months of 2014, the report states.
The report concludes that the results of PJM's energy, capacity, regulation and financial transmission rights markets were generally competitive in the first six months of 2014.
