Due to record high temperatures and fuel constraints, wholesale electricity prices in the western United States reached their highest levels since 2008 this summer.
According to the US Energy Information Administration, in the area served by the California Independent System Operator (CAISO), peak-period electricity prices in July averaged $101 per megawatt hour (MWh), the highest monthly average since the current day-ahead market began trading in April 2009. Peak-period electricity prices at the Palo Verde trading hub in Arizona and at the Mid-Columbia hub in the Pacific Northwest averaged $89/MWh and $72/MWh, respectively, in July. Prices in each area also remained relatively high through August.
Due to rising temperatures, the elevated electricity demand contributed to the highest wholesale prices in at least the past 10 years. The administration notes that daily average electricity prices at CAISO’s SP-15 trading hub, which reflect electricity market conditions in Southern California, reached $377/MWh on July 24. Electricity prices at the Mid-Columbia hub between Oregon and Washington averaged $230/MWh that day, and prices at the Palo Verde hub in Arizona reached $291/MWh on July 25; both were the highest daily average prices since 2008. Hot weather during the second week of August again led to relatively high electricity prices at the western U.S. trading hubs, and Mid-Columbia prices reached a new high of $255/MWh on August 7.
The administration notes that another reason for the high western electricity prices this summer was a sharp increase in natural gas fuel costs, particularly in Southern California. On July 24, natural gas prices at Southern California Gas Company’s (SoCal) Citygate, where natural gas enters SoCal’s local distribution system from the transmission pipeline, averaged $39 per million British thermal units (MMBtu), compared with an average price of $8/MMBtu the previous week. Prices at the SoCal Border hub, which reflect transactions at pipeline interconnects near the Arizona-California border, averaged $15/MMBtu on July 24, up from $2.90/MMBtu the previous week.