PJM TRACKER: Power prices up nearly 200% as gas price rise pushes up forwards

PJM Interconnection wholesale power prices increased by nearly 200% at some hubs in October on year and between 20% and 30% on month due largely to higher natural gas prices, while forward power prices continued to strengthen over the winter months.

PJM East Hub October on-peak day-ahead locational marginal power prices averaged $51.92/MWh in October which was an increase of $34.58/MWh, or 199%, on year. And on-peak day-ahead power prices at the hub were up by $9.32/MWh, or 22%, from September.

PJM West Hub on-peak day-ahead power prices averaged $67.12/MWh in October, an increase of $42.74/MWh, or 175%, from year-ago levels, while prices at the hub increased by $15.40/MWh, or 30%, on month.

AEP-Dayton Hub day-ahead on-peak power prices averaged $65.43/MWh in October, an increase of $40.69/MWh, or 165%, from October 2020, and on-peak day-head prices at the hub were up by $14.92/MWh, or 30%, from September.

PJM's wholesale power prices have largely been driven higher by natural gas prices that have rebounded from much lower year-ago levels. The fuel supplies much of PJM's electricity.

"The upward pressure on coal and gas prices alike continues to push power prices higher," S&P Global Platts Analytics said in a recent research note.

"We forecast October-November on-peak prices to return below $50/MWh on account of lower loads," Platts Analytics said.

Platts Texas Eastern gas prices averaged $4.58/MMBtu in October which was 277% higher than the October 2020 average of $1.22/MMBtu. Spot gas prices at the hub were 6.5% higher in October on month.

October Chicago city-gates gas prices averaged $5.26/MMBtu which was a 153% increase from the October 2020 average of $2.08/MMBtu. Gas prices at the hub were about 10% higher on month.

PJM's higher October power and gas prices came amid a 16% decrease in peak load from September, with October power demand averaging 88,951 MW compared with 105,299 MW the previous month when electric cooling demand was higher.

The average high temperature across the PJM footprint in October was 69.6 degrees Fahrenheit, compared with an average high of 78.2 degrees F in September, according to CustomWeather data.

As a result, October heating degree days averaged 4.2 compared with an average of 0.6 the previous month and cooling degree days fell from a September average of 5.2 to 1.7 in October.

Power generation fuel mix

Gas-fired power generation accounted for 41.5% of the October PJM fuel mix, up from 37.5% in September, while coal-fired power accounted for 15.6% in October, a decrease from the September average of 20.7%, according to ISO data.

Nuclear power accounted for 34.7% of PJM's October fuel mix, up slightly from 34.1% in September.

"We now forecast normal operations at the Byron/Dresden nuclear plants following the refueling outage at Byron 1," Platts Analytics said, adding that "with the return of 'normal' nuclear operations, we anticipate more expensive coal- and gas-fired generation to be pushed back out of the stack in fourth-quarter 2021 and limit price upside as a result."

Hydropower accounted for 2.0% of the October generation mix, down from 2.3% in September, but up from 1.5% in October 2020.

Wind power accounted for 3.6% of the PJM fuel mix in October, up from 3.2% in September, while non-wind renewables decreased slightly from 1.54% of the September fuel mix to 1.38% in October.

PJM's gas fleet consumed about 3.90 Bcf/d in October, up 3.4% from September and down 0.7% from October 2020. Assuming a similar heat rate to December 2020, PJM's gas fleet would consume about 3.67 Bcf/d in December 2021, which would be about 13% lower year on year, according to Platts Analytics data.

Forward power, gas prices

PJM West Hub on-peak forward power prices for November averaged $64.00/MWh in October trading, which was $35.48/MWh, or about 125%, higher than year-ago levels, according to Platts M2MS data. On-peak forward power for December averaged $73.94/MWh and January 2022 averaged $102.46/MWh in October trading.

AEP-Dayton on-peak forward power prices averaged $62.13/MWh for November, a 115% increase from November 2020, and forward power prices rose to $87.54/MWh in January 2022 during October trading.

Northern Illinois Hub on-peak power forwards averaged $55.72/MWh for November, a 119% increase from year-ago levels, and January 2022 power forwards at the hub averaged $77.03/MWh during October trading.

Platts Transco Zone 6 Non-New York forward gas prices for November averaged $5.25/MMBtu during October trading, which was about 127% higher than a year ago. Forward gas prices for December averaged $7.25/MMBtu and January 2022 averaged $9.95/MMBtu in October trading.

"As in the Northeast, our gas and power prices remain at a discount to market through the winter," Platts Analytics said. "Looking through the balance of 2022, our expectations for prices are more aligned with market," the analysts said.

"Of note, we have also demonstrated incremental gas-to-coal switching in the second half of 2022 associated with the upward revision in gas prices," Platts Analytics said.