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Wholesale electricity prices and demand in New England, April 2017

Rising natural gas prices caused wholesale electricity prices to increase during April

Natural gas prices in April were nearly 10% higher than during the previous April in New England, pushing up the average wholesale power price to $31.51 per megawatt-hour (MWh)*, a 12.6% increase compared to the April 2016 average price of $28.00/MWh. For a month-to-month comparison, the April power price was 9.5% lower than the March average price of $34.81.

Drivers of Wholesale Electricity Prices

In general, the two main drivers of wholesale electricity prices in New England are the cost of fuel used to produce electricity and consumer demand.

Power Plant Fuel: Fuel is typically one of the major input costs in producing electricity. Natural gas is the predominant fuel in New England, used to generate 49% of the power produced in the region last year, and natural gas-fired power plants usually set the price of wholesale electricity in the region. As a result, average wholesale electricity prices are closely linked to natural gas prices.

The average natural gas price during April was $3.17 per million British thermal units (MMBtu),** up 9.1% from the April 2016 average Massachusetts natural gas index price of $2.91/MMBtu. The Mass. index price is a volume-weighted average of trades at four natural gas delivery points in Massachusetts, including two Algonquin points, the Tennessee Gas Pipeline, and the Dracut Interconnect. The April average natural gas price was down 28.9% from the March 2017 monthly average of $4.46/MMBtu.

Electricity Demand: Demand is driven primarily by weather as well as economic factors. Energy usage during April 2017 dropped 2.3% to 8,809 gigawatt-hours (GWh) from the 9,020 GWh used in April 2016. The average temperature during April was 51˚ Fahrenheit (F) in New England compared to the 46˚F average recorded during the previous April. The average dewpoint, a measure of humidity, came in at 38˚F, compared to 29˚F in April 2016. The number of heating degree days (HDD)*** totaled 430 in April, compared to 556 HDD in April 2016. The normal April level is 515 HDD in New England.

Peak demand for the month was recorded at 15,767 MW on April 6 during the hour from 5 to 6 p.m., when the temperature in New England was 40°F and the dewpoint was 39°. The April 2017 peak was down 7.1% from the April 2016 peak of 16,963 MW, set during the hour from 7 to 8 p.m. on April 4, 2016, when the temperature was 26°F and the dewpoint was 20°.

Peak demand is driven by weather, which drives the use of heating and air conditioning equipment. The all-time peak demand in New England was 28,130 MW, recorded during an August 2006 heat wave, when the temperature was 94°F and the dewpoint was 74°. Air conditioning use is far more widespread than electric heating in New England, so weather tends to have a relatively greater impact on the summer peak than the winter peak. The all-time high winter peak was 22,818 MW, recording during a cold snap in January 2004 when the temperature was -1°F and the dewpoint was -20°.

Fuel Mix: The mix of resources used in any given time period depends on price and availability, as well as supplemental resource commitments needed to ensure system stability. Natural gas-fired power plants produced most of the 7,315 gigawatt-hours (GWh) of electric energy generated within New England during April, at about 60%. Because some of the region’s nuclear power plants were offline for refueling, nuclear produced about 14% of the total during April. Hydroelectric resources in New England also generated 14%. Renewable resources generated about 11% of the energy produced within New England, including 7% from wood, refuse, and landfill gas; 3% from wind; and 1% from solar resources. Coal units generated 0.8%, and oil-fired resources produced under 0.1% of the energy generated within New England. The region also received net imports of about 1,605 GWh of electricity from neighboring regions.

April 2017 and Percent Change from April 2016 and March 2017
April 2017
Change from April 2016
Change from March 2017
Average Real-Time
Electricity Price
$31.51 +12.6% -9.5%
Average Natural Gas Price
$3.17 +9.1% -28.9%
Peak Demand
15,767 MW -7.1% -9.7%
Total Electricity Use
8,809 GWh -2.3% -15.1%
Weather-Normalized Use****
8,856 GWh -1.2% -12.3%
*One megawatt (MW) of electricity can serve about 1,000 average homes in New England. A megawatt-hour (MWh) of electricity can serve about 1,000 homes for one hour. One gigawatt-hour (GWh) can serve about 1 million homes for one hour. **A British thermal unit (Btu) is used to describe the heat value of fuels, providing a uniform standard for comparing different fuels. One million British thermal units are shown as MMBtu. ***A degree day is a measure of heating or cooling. A zero degree day occurs when no heating or cooling is required; as temperatures drop, more heating days are recorded; when temperatures rise, more cooling days are recorded. The base point for measuring degree days is 65 degrees; each degree of a day’s mean temperature that is below 65 degrees is counted as one heating degree day. A day’s mean temperature of 45 degrees equals 20 heating degree days. ****Weather-normalized demand indicates how much electricity would have been consumed if the weather had been the same as the average weather over the last 20 years.