Market monitor: Summer 2023 wholesale electricity costs drop 60%

Wholesale electricity costs were significantly lower in the summer of 2023 than the summer of 2022, according to the latest quarterly report from ISO New England’s Internal Market Monitor (IMM).

The drop resulted in part from a 71% year-over-year drop in the price of natural gas, New England’s predominant energy fuel. The impact of lower natural gas prices was offset somewhat by increased nuclear generator outages and reduced imports compared to last summer.

The Summer 2023 Quarterly Markets Report, which covers the period from June 1 to August 31, presents an assessment of each of the region’s wholesale electricity markets, based on market data, performance criteria, and independent studies. Highlights include:

• The total estimated wholesale market cost of electricity for the summer was $1.59 billion, down 60% from summer 2022.
• Energy costs totaled $1.23 billion, down 64% from last summer.
• Capacity costs totaled $257 million, down 39% from summer 2022, due to lower clearing prices in the 14th Forward Capacity Auction (FCA 14). The capacity payment rate was $2.00 per kilowatt-month (kW-month), compared to $3.80/kW-month in summer 2022.

The IMM said it remains concerned about high supply offers in the Forward Reserve Market, an issue the IMM first raised in its spring report. The ISO is developing a proposal to enhance competition in the Forward Reserve Market. The proposal includes lowering the offer cap from $9,000 to $6,300 per megawatt-month and delaying the publication of offer data for 12 months rather than the current four months. The Markets Committee is tentatively scheduled to vote on the proposal in December.