Report: Northeast power markets sending the right signals

June 21, 2002 — Despite the current malaise suffered by many in the US electricity market, Northeast power pools are alive, functioning, and sending the right signals, ESAI reported in its latest Power Quarterly Report – its ten-year price outlook for Nepool, NYCA, and PJM.

“However, locational power prices in the Northeast will continue to exhibit what we have previously referred to as “scarcity amidst plenty” characteristics,” says Kristin Dall, ESAI Manager of Power Services.

“The energy credit crunch, virtual death of the merchant plant developer’s business model, and ever-increasing transmission congestion will leave urban load centers like New York City, Long Island, Southwest Connecticut, and Boston extremely vulnerable to prolonged hot weather, limited generation, and transmission constraints in the future.”

ESAI has developed “zonal” pricing models for the Northeast that reflect locational pricing differences within Nepool, NYCA, and PJM. Power prices in the Northeast will continue to reflect transmission realities, with PJM prices at the bottom of the Northeastern stack and New York-New England pool wide prices converging at levels that are some $5/MWh higher.

As New England heads for zonal pricing in the next couple of years, this would mean high premiums in areas like Boston and SW Connecticut. ESAI expects generation investment to continue to decline, although investment in transmission could help narrow some of the zonal pricing deltas.

“We see little that will change the overall pricing difference for the load pockets,” said Dall. “Even if a Northeastern RTO were to be formed, some price deltas will endure.”

For more information, contact Patsy Norton at Tel: 781.245.2036, or E-mail:

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