Lately, the bulls have been running in NYC’s electricity market but there has also been a consolidation in forward prices. Figure 1 shows calendar year strips for wholesale electricity in New York City for 2021 through 2024. Wholesale prices in all calendar years hit their all-time lows in late March/early April, shown in the red oval, and have rallied over the last 6 months. Also note that over the last two years, near-term prices have always been less expensive that longer-term prices. This can be seen in the figure below as calendars 2021 and 2022 (blue and black lines) have consistently been less than 2023 and 2024 (green and yellow lines). This is referred to as a contango market, where prices get more expensive into the future.

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Over the last month, near-term electricity prices in New York have risen while longer-term prices have fallen. Figure 1 shows how the price of a one-year strip of electricity has traded since January 2019 for calendar years 2021 through 2025 in New York City.  Note how prices in the near-term, 2021 (blue line) and 2022 (black line), have been rising over the last several weeks after hitting lows earlier this year in April and July.  Longer term prices for calendar years 2024 (yellow line) and 2025 (red line) have been falling since the middle of July.  It is important to note, however, that despite these recent market movements, overall prices across all calendar years are trading at or near their 4-year lows.   

The coronavirus has not only significantly reduced electricity usage and peak demand across the NYISO and PJM regions, it has also dramatically changed how retail electricity suppliers approach fixed price electricity offers to clients. In order for suppliers to generate fixed price offers, they first gather and review the previous 12 months of historic usage data, including the volume of electricity consumed (MWhs) and the peak demand (MWs).

PJM:

Temperatures throughout the northeastern U.S. are expected to approach or exceed 90°F this afternoon, driving electric demand close to 2020 summer highs.

New York City’s Local Law 33/95 will require building owners to post their Energy Efficiency Rating Label in the next 90 days. In December 2017, the New York City Council passed Local Law 33/95, requiring building owners to post this label in a conspicuous location near each public entrance. This is required for all buildings over 25,000 square feet that are listed on the 2020 Covered Buildings List for benchmarking compliance. The intent of this law is to provide transparency into a building’s energy usage and efficiency.

NYISO:

Temperatures in New York City are expected to remain in the mid-90s throughout Monday. Even though precipitation is likely in the 7-10 day range, it is expected that Monday (7/27) will approach the year-to-date system peak of 29,979 MW which was set last Monday (7/20).

A high-pressure system has settled over the Midwest and Mid-Atlantic which will keep temperatures elevated today and tomorrow. These high temperatures will result in PJM and NYISO electric grids being pushed to the max. In NYISO, peak load of more than 29,933 MW is expected beginning at 4:00 PM today. Between 3:00 -5:00 PM, load is forecast at or above 29,700 MW, vs the current 2020 peak of 28,867 MW.

It is important to note that load this morning is coming in ~600 MW higher than yesterday’s projections, which reflects how warm it is in the New York region today. Temperatures in New York City are expected to exceed 95 degrees. 

It appears the fireworks have come early this year as several markets are facing medium to high threats for Coincident Peaks (“CPs”) today and into the early part of next week.

A fixed price electricity contract is the most common product selected by commercial clients throughout the deregulated markets in the US. And while the cost of the energy (the electrons moving through the wires) is the often the largest and most volatile part of a retail electricity price, there are several other electricity cost components that are built into that retail price.