Northeast survives June heat

July 16, 2002 — As early summer heat waves and humidity plagued the Northeast late last month, regional power markets weathered the storm and power prices averaged well under earlier forward market valuations, ESAI reports in its latest North American Power Watch Monthly Report – its six month price outlook for Nepool, NYCA, and PJM.

“New York successfully withstood loads at near-record levels and a major transmission disruption. PJMOI met loads above 50,000 MW for several days in a row, and in spite of significant base load outages, prices did not spike as high as during the August 2001 heat wave,” says Jaya Bajpai, ESAI’s Northeast Analyst.

“In addition, Nepool successfully withstood loads at near-record levels without major disruptions.”

In its earlier Power Watch reports released this spring, ESAI warned that the forward curve was significantly over-valuing the summer months. In mid-May, the market placed a “risk premium” on June power packages for certain New York Control Area (NYCA) zones and Nepool that turned out to be 25-30 % too high.

“There may have been too much weight placed on natural gas price strength at the time,” says Bajpai. “The forward curve continues to place an unwarranted risk premium on certain Northeast hubs for August power.”

However, barring a catastrophic event, ESAI said it does not foresee a problematic summer in the region.

For more information, contact Patsy Norton at Tel: 781.245.2036, or E-mail: pnorton@esaibos.com.

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