Cold Snap Causes Northeast Power and Gas Price Spike
The Northeast region of the United States has been hit with some of the coldest weather this winter, causing a significant surge in power and natural gas prices. This trend is expected to continue into early next week, with temperatures forecast to remain low.
According to data from ISO New England (ISO-NE) and the New York Independent System Operator (NYISO), power prices have skyrocketed. On-peak day-ahead power prices at the ISO-NE Internal Hub averaged $63.77/MWh in November, but by the week ending December 5, they had surged to $161.97/MWh. The peak was reached on December 5, with prices soaring to $212.24/MWh when the temperature in Boston was a frigid 27 degrees Fahrenheit.
Natural gas prices followed a similar pattern. In November, natural gas accounted for 55.3% of the region's power generation. During the same period, Algonquin city-gates gas prices averaged $4.69/MMBtu, but they jumped to $17.58/MMBtu by the end of December 5. This represents an astonishing 182.17% increase since November 28.
The gas prices reached an all-time high of $24.51/MMBtu on December 4, surpassing the previous record of $33.52/MMBtu set on January 21. The prompt-month forward gas price at the hub averaged $18.55/MMBtu, according to Platts M2MS data.
The drop in temperatures in Boston, from 43 degrees Fahrenheit on November 28 to a forecasted 27 degrees on December 5, has contributed to the surge in gas prices. Temperatures are expected to remain low, with a low of 13 degrees Fahrenheit predicted in Boston on December 8. This is significantly below the five-day norm, according to CustomWeather data.
The NYISO also experienced similar dynamics. Zone J New York City on-peak day-ahead power prices averaged $62.00/MWh in November, but they rose to $125.36/MWh by the end of December 5. The temperature in the NYISO footprint averaged 29.4 degrees Fahrenheit on December 4, and it was forecasted to drop to 21.9 degrees on December 5.
While natural gas prices in the region have also increased, they haven't reached the same extreme levels as in New England. Transco Zone 6 gas prices averaged $3.48/MMBtu in November, but they jumped to $5.73/MMBtu by the end of December 5. The prompt-month forward gas prices at the hub are forecasted to average $12.37/MMBtu.
However, there's a catch. According to CustomWeather data, temperatures across the ISO are expected to average 24.7 degrees Fahrenheit on December 8, before rising back above freezing to an average of 35.4 degrees on December 12. This slight increase in temperature might prevent prices from spiking further during the week ending December 12.
Temperatures are forecasted to remain low, averaging 34.3 degrees during the week ending December 19, but the region is still bracing for the impact of the cold snap on power and gas prices.
