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Navigating Winter 2014 Electricity Price Spikes: Customer Actions and Risk Management

Learn how customers can respond to the electricity price spikes during the Winter 2014 season, caused by factors like the Polar Vortex and market dynamics. Understand the impact on energy markets and how to manage risks effectively. Explore insights on NYISO gas and power prices, capacity concerns, and weather outlooks to make informed decisions. Discover strategies to align your energy budget with market fluctuations and ensure timely responses to price changes. Stay informed, proactive, and adaptable to optimize your energy budget amid evolving market conditions.

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Navigating Winter 2014 Electricity Price Spikes: Customer Actions and Risk Management

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  1. How Should Customers Respond to The Winter 2014 Electricity Price Spikes?October 8, 2014 Ron Aberizk Sr. Sales Manager, Direct – Upstate NY

  2. Polar Vortex = Strong Demand Jan 2014 • GWHDDs = 1048 • GWHDD 10YA = 931 • 15th coldest since 1950 Feb 2014 • GWHDDs = 883 • GWHDD 10YA = 796 • 8th coldest since 1950 • Impact on energy markets: • New York spot price spiked for natural gas and electricity • NYMEX spot natural gas increased to 5-year highs (One month forward) Persistent, large-scale cyclone (intense area of low pressure) located near both poles. Stronger in the winter. Associated with extreme cold, but typically reside near/within the Arctic/Antarctic.

  3. Jan14 NYISO Gas/Power Prices Increased West to East Western zones had lower gas/power prices due to lower consumption and less gas constraints Western Zones have more coal/hydro than east Eastern zones had Higher gas/power prices due to higher consumption and gas constraints Zone F can deliver power to ISO-NE Zone F & ISO-NE prices highly correlated

  4. Daily NYISO Average Costs/MWh 2014 LBMP Average Cost/ MWH 2013 LBMP Average Cost/ MWH

  5. NYISO Zone A vs. Dominion South Port

  6. NYISO Zone G vs. Tennessee Zone 6

  7. NYISO Regional Issues • NYISO set new peak records • New, all-time record peak set July 9, 2013 - 33,956 MW • New winter peak reached in January 7, 2014 - 25,738 MW • Peak demand expected to outgrow electrical usage • over next 10 years • Peak demand projected to grow at average annual rate of 0.83% • Overall usage forecast to grow at average annual rate of 0.16% • Power plant retirements outpaced additions • Resource margins remain positive, however . . . • Surplus went from 5,000 MWs in 2012 to 1,900 MWs in 2014 • New York moving to diversify generation, but gas rules! • 2013 - 46% electric generation fueled by duel fuel (gas&oil) • More than 70% of proposed power projects would be fueled by gas

  8. NYISO Reliability Concerns Reflected in Capacity Prices NYISO

  9. NYISO Generation Addition and Removal • Selkirk Units 1&2 notice of mothballing withdrawn 9/14 • + 348MW • Danskammer back to service • + 494MW • Total 842MW • 527MW Deficiency

  10. Weather Outlook – This Or ? NWS Dec-Feb ABOVE Normal Temps Northern U.S. NOAA; NWS 7

  11. Farmer’s Almanac- Winter 2014-2015

  12. Response • Know your objectives and risk tolerances/ Quick Reactions • Gas pipeline situation unchanged from last winter • Upside risk greater than downside • Weather “risk” premiums may only diminish closer in • Power – potential transmission/capacity increases • Energy Budget Strategy should include: • Ability to act quickly if gas/power price decline or increase above budget targets 7

  13. QUESTIONS ?

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