US POWER TRACKER: June MISO power prices rise on higher fuel prices, power burn

Wholesale power prices in June more than doubled year on year across much of the Midcontinent Independent System Operator, amid higher natural gas and coal prices and an increased reliance on natural-gas fired generation.

June average day-ahead on-peak locational marginal prices increased more than 150% year on year at the Indiana, Michigan, Louisiana and Texas Hubs.

The biggest percentage increase among these locations was at the Indiana Hub, which averaged $115.55/MWh in June, a 184% increase from June 2021 and a 23% increase from May 2022.

The wind-rich Minnesota Hub saw a much smaller increase, averaging $66.04/MWh in June, a 33% increase from June 2021 and an 8% increase from May 2022.

Fuel price impacts

Fuel prices were a key driver of power price increases year on year. Henry Hub spot gas averaged $7.694/MMBtu in June, a 141% increase from $3.187/MMBtu in June 2021, but 4% less than $7.999/MMBtu in May 2022. Chicago city-gates spot gas averaged $7.420/MMBtu in June, up 138% from June 2021 but down 5% from $7.793/MMBtu in May 2022.

Gas prices in June and beyond were impacted by the June 8 fire and subsequent closure of the Freeport LNG terminal in Texas, which had the effect of boosting domesti gas supplies and softening gas prices. The US Pipeline and Hazardous Materials Safety Administration has said it wants Freeport LNG to take corrective actions befcore resuming normal operations. Freeport LNG currently plans to return to partial service in October and full service by the end of the year.

As the country's largest coal-burning region, MISO power prices were also boosted by historically high coal prices in June. Rising nearly 350% on the year, the Illinois Basin 11,500 Btu/lb barge coal price averaged $159.34/st in June, compared with $35.50/st in June 2021, according to the Platts assessment by S&P Global Commodity Insights.

US June over-the-counter coal prices were supported by tight supplies, limited domestic intermodal availability and unprecedented global demand amid Russia's war in Ukraine. Pricing was particularly bullish for US OTC coals that more easily move into export markets, such as Central Appalachia and Illinois Basin. For example, Illinois Basin coal is barged down the Mississippi River to vessels along the Gulf Coast. Meanwhile, landlocked coals posted more modest year-on-year price movements. Prices in the Powder River Basin, which also supplies MISO, averaged $16.30/st in June, up 30.9% from $12.45/st in June 2021.

Power burn rises

Gas-fired generation was up in June. Average daily power burn for MISO's gas-fired generation fleet was about 4.3 Bcf/d in June, up from 3.2 Bcf/d in May, and up from 4 Bcf/d burned in June 2021, according to data from S&P Global Commodity Insights. Daily power burn is projected to be 4 Bcf/d in August, assuming a heat rate similar to August 2021. Daily power burn was 4.1 Bcf/d in August 2021.

Natural gas-fired power was at the top of the generation mix, providing 37.5% of MISO's average daily power in June, up from 33.4% in May, and up from 32.8% in June 2021. Coal came in second at 33.7% of the fuel mix in June, up from 32.1% in May but down from 40% in June 2021. Nuclear was next in line, supplying 13.7% of MISO's generation in June, compared to 13.8% in May and 9.5% in June 2021. Wind provided 11.8% of MISO's generation in June, down from 16.9% in May, but up from 9.5% in June 2021.

Power forwards

August average power forwards were also up sharply at key locations in June, compared to the price of August 2021 prices in June 2021.

Indiana Hub August on-peak power forwards averaged $148.96/MWh in June, up 256% from $41.86/MWh that August 2021 forwards averaged in June 2021, but down 4% from $154.51/MWh that August 2022 forwards averaged in May 2022.

Louisiana Hub August on-peak power forwards were also up, averaging $141.61/MWh in June, up 249% from $40.56/MWh that August 2021 forwards averaged in June 2021, but down 4% from $147.16/MWh that August 2022 forwards averaged in May 2022.

Gas forwards were also higher year on year. Chicago city-gates August gas averaged $7.349/MMBtu in June, up 130% from $3.196/MMBtu that August 2021 gas averaged in June 2021, but down 8% from $8.028/MMBtu that August 2022 gas averaged in May 2022.

Henry Hub August gas averaged $7.599/MMBtu in June, a 131% increase from $3.287/MMBtu that August 2021 gas averaged in June 2021, but down 8% from $3.287/MMBtu that August 2022 gas averaged in May 2022.