The biggest story in Texas’ energy markets has been the collapse of West Texas Intermediate (WTI) crude oil prices. The price for the WTI May contract had its largest single-day decrease on Monday, April 20th. It was also the first time in history that the price of crude was negative and closed below zero at the end of the trading day. There was a slight recovery the following day as the price rose above zero and settled at $10.01 per barrel on Tuesday. In addition to having a massive impact on Texas’ economy, this unprecedented drop in the price of WTI crude is also having a significant impact on natural gas prices.
4 min read
Gas and Power Prices Rally While West Texas Congestion Pricing Drops
By 5 on April 23, 2020
Topics: Markets ERCOT
3 min read
Why is Natural Gas not Following Crude Oil into the Basement?
By 5 on April 22, 2020
The market price for oil has been consistently bearish since global oil demand destruction conversations began in early March. On Monday, April 20th, that outlook manifested itself into a day that oil traders will never forget. Crude oil opened trading on Sunday evening at approximately $17 per barrel and by mid-morning, it had dropped to $10 per barrel. By mid-day, it was trading just above zero, and then it broke through into negative territory in the afternoon. Crude oil settled for the day at -$37.63, up just a few dollars from the daily low of -$40.32 per barrel.
Topics: Markets Natural Gas
4 min read
Good News and Bad News for New York Electricity Clients
By 5 on April 22, 2020
There is often both good and bad news anytime commodity markets are volatile.
The bad news:
Earlier this month, the NYISO (the entity in charge of economically maintaining the electricity system in New York) completed the first two of three capacity auctions that ultimately set the price paid for capacity in the coming summer months (May – Oct 2020). Many were anticipating higher summer capacity prices (especially in New York City) from this month’s auction given how high forward capacity prices have been. Historical capacity prices for New York City and the rest of New York State are shown in Figure 1.
Topics: Markets NYISO
2 min read
FERC Upholds December’s MOPR Decision for PJM
By 5 on April 22, 2020
Unlike ERCOT, which relies solely on the price of energy to ensure sufficient supply, the PJM market, ISO-NE, and the NYISO all rely on capacity payments to ensure that there is enough electricity generation available to meet demand. Like wholesale energy prices, capacity prices in PJM are set through an annual auction. Generating units that clear this annual capacity auction are guaranteed a fixed revenue stream in exchange for the guarantee of their availability to run if called upon. This revenue is designed to ensure that an appropriate amount of generation is available at times of peak energy demand.
Topics: Markets PJM
2 min read
Energy Contracts and Coronavirus
By 5 on March 19, 2020
In light of the impact of the Coronavirus on business operations, we are sharing information about Coronavirus and Contract Disputes circulated by the law firm Sidley & Austin. It provides a high-level summary of the force majeure issues raised by the spread of this illness. If your electricity and/or natural gas usage has or will be significantly affected by the spread of the Coronavirus, you should seek legal advice to determine if it is appropriate to provide a force majeure notice to your energy supplier. As discussed in the document, the relevant electricity or natural gas contract provision may require “prompt” notice of the force majeure event.
Topics: Markets PJM NYISO ERCOT Education
3 min read
Capacity is Up and Power is Down
By 5 on March 19, 2020
Over the past month, there have been a few regulatory developments that will affect generators, their amount of generating capacity and the cost of that capacity throughout New York State. Recently, the Federal Energy Regulatory Commission (FERC) issued several rulings related to the ways subsidized renewable generating assets will be able to participate in future NYISO capacity auctions. These rulings place limits on the way generation from subsidized assets, such as wind farms, solar arrays and battery storage resources, can take part in New York’s capacity auction process. Furthermore, New York State placed additional emissions restrictions on natural gas and oil-fired assets that run during periods of peak electricity demand on the grid.
Topics: Markets NYISO Resiliency
2 min read
Capacity Auction Plan Announced
By 5 on March 19, 2020
This week PJM proposed a plan and schedule to resume its suspended capacity auctions. If everything goes as planned, the next PJM capacity auction process using the new Minimum Offer Price Rule (MOPR) would begin in March or April 2021. In order to meet this goal, the Federal Energy Regulatory Commission (FERC) must review and approve PJM’s MOPR. PJM’s last capacity auction was in May 2018. The plan and proposal to catch up on the backlog of capacity auctions are summarized below and shown in Figure 1.
Topics: Markets PJM
3 min read
Saudi Arabia and COVID-19 Pushing Down Gas Prices
By 5 on March 19, 2020
On Sunday, March 8th, the NYMEX natural gas market opened at approximately $1.67/MMBtu. By the early morning hours of Marh 9th, it dropped down to almost $1.60 and ended the day up about 9¢, at $1.78/MMBtu. On Tuesday, March 10th, natural gas again rallied another 16¢ to close around $1.94/MMBtu. By Wednesday morning, the rally continued up to about $2.00/MMBtu before news around COVID-19 began to take hold, moving the market down. These market movements are shown below in Figure 1 (note that the height of the line shows the day’s range between the minimum and maximum trade prices, the height of the bar is that day’s difference between opening and closing prices, and the color of the bar indicates if the day closed up (green) or down (red) compared to the open).
Topics: Markets Natural Gas
3 min read
Good News for Texas Electricity Buyers
By 5 on March 19, 2020
There is good news for Texas electricity buyers. The falling price of West Texas Intermediate crude oil, coupled with the threat of an economic slow-down caused by COVID-19, has put downward pressure on forward power prices for this summer in Texas.
Additionally, ERCOT released the preliminary Seasonal Assessment of Resource Adequacy (SARA) for this coming summer. This report showed more growth than was originally expected in the amount of generating capacity available to meet this summer’s electricity demands. The potential drop in forecasted electricity demand for this summer, along with favorable news in the SARA report, has come at a good time for some electricity clients in Texas.
Topics: Markets ERCOT
3 min read
Texas Power Prices: 2019 vs 2020
By 5 on February 27, 2020
With 2019 finally behind us, it’s time to reflect on how spot/index prices settled last year in Texas and then examine how those prices are shaping the current forward market.
In 2019, index prices in Texas settled at one of the highest levels over the last 10 years. Figure 1 shows that only 2011 (the year it snowed during the Super Bowl in Dallas with rolling blackouts and a very hot summer) and 2014 had higher index settlements than last year. The high index settlement price for 2019 should not be much of a surprise given the index price volatility that was experienced in August and September. Index prices in August 2019 cleared at the highest average price in the history of Texas’ deregulated electricity market, while index prices in September 2019 were at the 4th highest level in ERCOT’s history. Most of these high prices came from approximately 6 hours on August 13th and August 15th and two hours on September 22nd.