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New England could see localized gas, power price spikes this winter: FERC staff

By: Bobby McMahon |

Ongoing constraints in the natural gas system could contribute to localized price spikes for both electricity and natural gas in New England this winter, staff at the US Federal Energy Regulatory Commission said Thursday.

While reporting that the outlook for power and natural gas markets looks “generally positive” for the winter, Valeria Annibali of FERC’s Office of Enforcement said at the commission’s monthly meeting that natural gas and power futures prices in New England are up significantly from last year.

“A customer in New England can purchase natural gas for delivery in January and February at almost $12/MMBtu, almost double the price at this time last year,” Annibali said. “Winter electricity peak futures prices are $100/MWh, 52% higher than last winter.”

Due to the increasing reliance on natural gas-fired generation for baseload generation and ongoing natural gas pipeline constraints, New England has been a key area of focus for FERC in seeking to address emerging challenges from coordinating the natural gas and power industries. Annibali noted in her presentation that last winter saw natural gas price spikes in New England, which led to power price spikes due to the fact that “natural gas is the marginal price-setting fuel during most hours of generation.”

In a broader energy market assessment released October 16, FERC staff noted that electricity and gas prices in the ISO New England region have correlated strongly in recent winters. Given that there have been “no major capacity changes since last winter” with the exception of some oil-fired units that ran infrequently, the assessment said that “we expect this same relationship between natural gas and power prices to continue this winter and believe that power prices should spike if there are high natural gas price events.”

But Annibali noted that natural gas prices elsewhere are lower than historic highs, and that natural gas storage “is more than adequate for a normal winter.”

Elsewhere in the assessment, FERC staff said that imports of liquefied natural gas “remain essential for minimizing natural gas price spikes in the New England market during peak winter demand days,” noting that they provide “alternate supplies when pipelines shipping natural gas from the south and east become congested.”

But the assessment as well said that LNG is likely to be in short supply this winter given that New England price spikes are “not sustained low enough to incentivize LNG cargoes.”

FERC staff also noted that the Midcontinent Independent System Operator is preparing to integrate Entergy assets into its system in December, adding roughly 40 GW of power to MISO. Noting that MISO plans to limit flows between its current footprint and the new area in the near term, FERC staff said that it “does not believe that this will create any issues for the upcoming winter.”