Electricity Prices Dip in 2012

08/23/2012 |

Peak prices (top) dropped significantly in many major wholesale price hubs, due in part to the warmest winter on record and a 10-year low in natural gas prices. Off-peak prices (above) also fell, though not as drastically.
COURTESY OF U.S. Energy Information Administration, based on SNL Energy
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The first six months of 2012 ushered in lower wholesale electricity prices for both on-peak and off-peak power, according to the U.S. Energy Information Administration.

The warmest winter on record and a 10-year low for natural gas prices led to the significant drop over the same period in 2011. On-peak prices, for example, fell between 24-39% in major wholesale price hubs.

Prices for off-peak electricity (used on nights and weekends) also dropped in the same time period for most of the studied cities, though the decline was smaller than that of on-peak power. However, the CAISO NP15 hub in northern California increased 10%, due mainly to nuclear outages this spring and record-breaking hydroelectric output in spring 2011.

According to the Energy Information Administration, off-peak prices reflect the cost of maintaining output from baseload generators. On-peak prices, on the other hand, reflect the price of generating from intermediate and peak generators throughout the day, a more expensive proposition.

Natural gas fell about 40-50% compared to last year, which led to increased use of natural gas to generate electricity, which then enabled the decline in wholesale electricity prices.


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