U.S. Spot Electricity Prices Remain Relatively Low, In Some Cases More Than 50% below July Contract Levels, According To Platts

Business Wire, July 26, 2001

Business Editors

NEW YORK--(BUSINESS WIRE)--July 26, 2001

Wholesale power prices in the U.S. spot market remain relatively low despite the start of summer, with prices in some cases more than 50% below July contract levels set in June, according to Platts, the energy market information division of The McGraw-Hill Companies (NYSE: MHP).

"The difference between the spot price and the monthly forward contracts shows that the market seriously misjudged the supply-demand picture for July," said Mike Wilczek, Platts senior electricity market reporter and Western power specialist. "Mild weather has kept demand low, and expected price spikes have not materialized."

Day-ahead spot prices at Palo Verde, the most actively traded Western power hub, have averaged $67.09/MWh, compared to an average price of $160.79 for July contracts traded during June. Western prices for third-quarter Palo Verde packages peaked at $575/MWh in April.

Elsewhere, average spot prices so far in July at the Into Cinergy trading hub, the largest volume hub in the Midwest, are $37.51/MWh, compared to an average of $71.90 paid for July contracts during June.

The trend is repeated across the country at all major trading hubs, but is most dramatic in the West, where a price cap imposed by the Federal Energy Regulatory Commission has made severe price spikes unlikely. A price ceiling of $91.87/MWh has been in place in the West since June 21.

High temperatures have only recently arrived in the Northeast and Midwest, driving up spot prices. While day-ahead prices in New England have broken $100/MWh for one day, the New England day-ahead average is $43.56/MWh, still more than $20 below what July contracts sold. These and other Platts energy prices can be charted at no cost at www.platts.com.

August contract averages this month are coming in below those of July and are much more in line with current spot prices, despite usually high spot prices during August. Palo Verde August prices are averaging $86.50/MWh and Into Cinergy is $49.09/MWh.

Lower natural gas prices this month and an overall mild summer to date have contributed to the weakness in August forward prices.

Platts is the world's largest and most authoritative provider of energy market information, with 14 offices worldwide and products ranging from real-time and Internet-based news services, to newsletters, market reports, databases, magazines and conferences. Platts services cover the oil, petrochemical, natural gas, electricity, nuclear power, coal, metals and bandwidth markets. Every day, more than $10 billion worth of trading activity and term contract sales are based on Platts' price assessments. Additional information is available at www.platts.com and www.plattsmetals.com.

Founded in 1888, The McGraw-Hill Companies is a global information services provider meeting worldwide needs in financial services, education and business-to-business information through leading brands such as Standard & Poor's, BusinessWeek and McGraw-Hill Education. The Corporation has more than 300 offices in 33 countries. Sales in 2000 were $4.3 billion. Additional information is available at www.mcgraw-hill.com.