New England wholesale electricity prices reached their highest level in 10 years this past January, as rising natural gas demand squeezed power plant capacity, according to grid administrator ISO New England.
The average real-time wholesale electricity price during January was $162.88 per megawatt hour, a 94 percent increase from the January 2013 price. The 2014 price was 46 percent higher than the previous high set in October 2005 when hurricanes damaged the natural gas infrastructure in the Gulf of Mexico.
The increase was driven by demand for natural gas, which provides fuel for home heating and power plants. Because New England has a limited pipeline supply of natural gas imported into the region, as the cold weather drove up home heating demand, less natural gas was available for power plants, which were forced to slow or shut down production. As a result, plants fueled by coal and oil had to make up the difference.
The natural gas supply constraints also drove up the price of natural gas to a 10-year high. The average price in January was $24.19 per million British thermal units, a 34 percent increase over the previous high set in February 2013 when a blizzard and cold temperatures also impeded natural gas supply.
The price spike in natural gas drove the cost of the commodity above that of oil, which had been significantly higher than natural gas for the last couple of years. Oil was priced at $15.44 per million Btu in January.
