Anomaly no more; prices spike again

Issue 9 and Volume 77.

David E. Wojick

Ph.D, P.E.

independent analyst

Analysts predicting that last year`s price spike would repeat itself (Electric Light & Power among them) were vindicated in late July, as prices surged throughout the Midwest and South.

According to the Bloomberg Daily Power Report, next day 25-50 MWh pre-scheduled packages, excluding transmission costs, traded for more than $2,000 per MWh on both July 28 and 29 in much of the eastern interconnection. Power usually trades for $20.

Only the Northeast was spared the spike, which some traders insist is a reasonable response to constrained transmission and limited generation capacity.

Prices started moving up as early as July 15 as the prolonged heat wave took hold. The affected region included the East Central Reliability Area, Mid-America Interconnected Network, Mid-Continent Area Power Pool, Southeastern Electric Reliability Council, and Southwest Power Pool of the North American Electric Reliability Council. Power in this region normally trades for between $20 and $30 per MWh, but on July 15, it jumped into the $40 to $50 range and never looked back.

Finally on Aug. 2, prices dropped into the $40 range, where they hadn`t been since July 15.

With the return of cooler weather, prices are expected to return to normal, but it appears the wild price ride is a regular feature of the new power market.