By Michael Brooks
WASHINGTON — On-peak day-ahead electricity prices in the U.S. were down 27 to 35% in 2015 compared to 2014 largely because of cheap natural gas, FERC staff said in its State of the Markets presentation Thursday. LMPs in New York hit a 15-year low.
FERC: 2014 a Record-Breaking Year for Natural Gas.)
The increase in supply has led to the addition of 51 Bcf/d in new pipelines in the last five years, with an additional 49 Bcf/d planned or proposed to come online by 2018. Demand for gas, however, grew only 1.3% last year as a result of a mild winter.
As a result of the low prices, gas-fired generation surpassed coal-fired on a monthly basis for the first time in April 2015, and beat coal in six of 11 months through November, according to the Energy Information Administration. Each provided about one-third of all electricity generation.
EIA predicted last week that natural gas will provide 33% of generation in 2016 while coal’s share falls to 32%. Bowring Urges Return to ‘Fundamentals’.)

About one-sixth of U.S. natural gas is a byproduct of oil production, which suffered as prices fell 66% between June 2014 and December 2015. According to the U.S. Bureau of Labor Statistics, the oil and gas industry shed about 17,000 jobs last year, while the U.S. oil rig count dropped by 61%.
“Long-term demand growth for U.S. natural gas will likely come from increased gas-fired electric generation, particularly in the Southeast, growing industrial demand, LNG exports and pipeline exports to Mexico,” staff said.
The price of LNG, which was exported for the first time from Cheniere Energy’s Sabine Pass terminal on the Texas-Louisiana border to Mexico last month, is indexed to oil in most long-term contracts.
LMPs down, Capacity Prices up
The fall in electricity prices was in sharp contrast to 2014, when prices rose across the country, in part due to the severe winter in the Northeast and Midwest.

“These lower LMPs and higher capacity prices in PJM have resulted in the ‘all-in’ costs of energy, capacity, transmission and ancillary services to increase by 5% between 2013 and 2015,” FERC staff said.
“As the markets are calling for new resources, we’re seeing significant increases in the capacity markets, really stress testing the markets, and … I think ancillary services are going to get a lot more important in the future [to] balance all the interruptible resources,” Commissioner Cheryl LaFleur said.
Electricity demand fell by 1.1% in 2015 as a result of low economic growth and increased efficiency in appliances. Electricity use fell in the industrial sector, while residential and commercial customers showed little or no growth.
DER and Renewable Growth Continues

Wind continues to be the dominant renewable energy resource in the U.S., rising to 4.6% of total generation. While solar rose to only 1% of total generation in the country, it makes up 13% of installed capacity in California, home to half of the country’s utility-scale solar.
Proceedings for the case go back to early 2005, when FERC found that MISO had violated its Tariff by charging the Holland Board of Public Works and DTE a higher hourly non-firm point-to-point transmission rate in instances when the utilities redirected the receipt point for their firm point-to-point service within the same transmission pricing zone — but on a non-firm basis. The commission ordered MISO to issue refunds with interest for the difference between the two hourly service rates. The RTO was also required to file accompanying refund reports for Holland, DTE and “other similarly situated customers,” effectively extending refund eligibility to other market participants incurring similar charges.



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