With the three-month winter period behind us, I wanted to summarize where wholesale real-time electricity prices averaged and if they lived up to the concerns we had back in the Fall. There were several factors that led to those concerns and uncertainty of what the electricity prices would be in the spot market. And purchasing hedges at acceptable prices to cover the winter proved difficult as those prices continued to rise.

As we headed toward winter, ISO-NE indicated concerns of natural gas availability and other fuels that would leave them with challenging operating conditions if we were to experience very cold or extremely cold temperatures. Natural gas prices had been rising steadily the second half of the year with some high volatility occurring on a daily basis. Natural gas storage was below the 5-year average. The vast majority of LNG that would normally be offloaded in New England was expected to be exported to Europe and Asia where prices were commanding a premium. The increase in natural gas prices and speculation drove future electricity prices up considerably, with some utilities posting prices for January and February 2022 at unprecedented levels, as high as 31.2 cents per kWh. The global energy situation seemed to be affecting the US markets more so than in previous years. The expectations were that spot market electricity prices could soar beyond levels we hadn’t seen before. At the same time, the National Oceanic and Atmospheric Administration (NOAA) was predicting a milder than average winter providing some hope that prices would remain in check.

The results were interesting, and Chart 1 shows that prices varied as expected based on temperature. While prices weren’t unprecedented during the cold spells, I think on average they were higher than in some previous winters for the same weather conditions displayed in Chart 2 (natural gas prices the main driving factor).