Summer Energy Market Assessment 2005
May 4, 2005
Federal Energy Regulatory Commission • Office of Market Oversight and InvestigationsDisclaimer: This Report contains analyses, presentations and conclusions that may be based on or derived from the data sources cited,
but do not necessarily reflect the positions or recommendations of the data providers.
2004 Summer Assessment:Regional Markets Could Show Stress
Under Certain Conditions this Summer – Most Notably the West.
• Especially Tight Reserves in the West
• Load Pockets
• High Fuel Costs
Regional Electric Market Issues
will Depend
On Local Resources, Demand
and Operations.
• Below normal hydro conditions
• Regions with higher likelihood of fire
• Greater reliance on gas-fired generation
• Tight reserves under extreme heat
• MISO transition to full market operation
• PJM/MISO coordination
• PJM integration of new areas
• Load pockets in SW Connecticut and Boston
• Reserves may be low for very hot weather
• NYC/LI load pockets
• Short-term price spikes
Key Electric Fuel Prices Remain High
Sources: Natural Gas Intelligence, Bloomberg, L.P. and New York Mercantile Exchange (NYMEX).
$0.00
$10.00
$20.00
$30.00
$40.00
$50.00
$60.00
$70.00
Jan-03 May-03 Sep-03 Jan-04 May-04 Sep-04 Jan-05 May-05 Sep-05
Pric
e ($
per
sho
rt to
n)
Big Sandy River,West Virginia
NYMEXCentral Appalachia
Coal Futures04/29/05
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
$9.00
$10.00
Jan-03 May-03 Sep-03 Jan-04 May-04 Sep-04 Jan-05 May-05 Sep-05
Pric
es ($
per
MM
Btu
)
Henry Hub Cash Price
Henry Hub Futures Settlement Price on
04/29/05
$0.00
$5.00
$10.00
$15.00
$20.00
$25.00
$30.00
$35.00
$40.00
Jan-03 May-03 Sep-03 Jan-04 May-04 Sep-04 Jan-05 May-05
Pri
ces (
$ p
er
MM
Btu
)
Transco Z6 No. 2 Heating Oil, NY
No. 6 Fuel Oil, NY
With Healthy Gas Storage Inventories,
Oil is Driving Higher Prices
Sources: Natural Gas Intelligence, Bloomberg, L.P. and New York Mercantile Exchange (NYMEX).
New England Expects Record Peak Demand With Adequate Reserves
ISO New England Peak Forecast and Load
Probability Load
Average (50%) 26,355 MW
Hot (10%) 27,985 MW
Previous Peak: 25,343 MW
ISO New England Summer 2005 Reserve Margin
0%
5%
10%
15%
20%
25%
Average Summer Hot Summer
Sources: NEPOOL 2004 – 2013 Forecast Report of Capacity, Energy, Loads and Transmission (2004 CELT Report) and discussion with ISO New England. Annual net generation from ISO New England.
Load Pockets in New England may Face Continued Tightness
• Generation and transmission capacity in SW Connecticut remains inadequate
• Secured 218 MW of emergency summer resources
Supply and Demand Conditions in
the U.S. West this Summer may
Result in Periods of Market
Tightness – Higher Prices and
Even Interruptions.
Western Generation Is Heavily Dependent on Hydro and Natural Gas
0
10
20
30
40
50
60
70
80
90
100
110
120
130
140
150
160
170
WECC AZN CNV NWP RMP
Ca
pa
city
(G
W)
Other
Oil
Dual Fuel
Natural Gas - Other
Natural Gas - Gas Turbine
Natural Gas - Combined Cycle
HydroCoal
Nuclear
28% reserve margin(2004 projection NERC)
Projected peak demand(2004 projection NERC)
20%
10%
63%
18%
Source: OMOI Analysis of NERC 2004 ES&D database.
Hydro and Snow Pack are Below AverageHydro Generation Snow Water Equivalent
In-State Capacity (MW)
Additional Capacity Created
Downstream (MW)
One Year Ago(% of
average)
4/27/05(% of average)
California
British Columbia
Idaho
Washington
Montana
Oregon
10,400
10,000
2,700
21,500
2,700
9,100
0
16,200
19,700
0
16,200
0
78%
80%
60%
74%
70%
71%
147%
89%
75%
32%
59%
53%
Sources: OMOI analysis; derived from data from EIA, BPA, Natural Resources Conservation Services, and Bloomberg, L.P.
Southern California’s
Summer 2005 Resource
Margins are Inadequate for an Extremely Hot Summer
CAISO Southern Region Summer 2005 Reserve Margin
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
June July August September
Desired Normal Summer Hot Summer
Sources: OMOI Analysis of the California Energy Commission Summer 2005 Electricity Supply and Demand Outlook Draft Staff Report, March 2005 and CAISO 2005 Summer Operations Assessment, March 23, 2005.
Most Recent NOAA Forecast
is for Above Average Western Summer
Temperatures
What Could Trigger Periods Of Electric Scarcity in the West?
• Hotter-than-average weather
• Transmission disruptions
• Generation disruptions
What Effects Would Scarcity Have on Western Markets?
• Price levels are likely to be higher all summer due to more expensive gas.
• Spikes possible due to extraordinary heat or system failures.
• Forward contracting, Commission rules and oversight make spot price manipulation less likely.
Focus of Oversight Attention This Summer
•Western market behavior and prices
•New England prices in load pockets
•MISO implementation
•Price spikes in New York
•Natural gas storage fill
Contributors
• Stacy Angel
• William Booth
• Judy Eastwood
• Robert Flanders
• Alan Haymes
• Matthew Hunter
• Steven Michals
• Colin Mount
• Thomas Pinkston
• Clint Ramdath
• Jamie Simler
• Harry Singh
• Jennifer Tremper
• Julia Tuzun
• Dean Wight
Top Related