This article comes from law firm Troutman Sanders LLP
On May 16, 2013, FERC’s Office of Enforcement and Office of Electric Reliability jointly presented their annual assessment of the condition and reliability of the energy market to FERC. The presentation, titled Summer 2013 Energy Market and Reliability Assessment, predicted an increase in natural gas prices due to higher-than-normal summer temperatures, as well as an increase in coal usage due to the increased natural gas prices.
The key points from the report, discussed more fully below, are as follows:
- Reserve margins remain adequate with the exception of Texas
- South Orange County and San Diego face tight capacity situations
- Higher natural gas prices should favor coal over natural gas
- Forward natural gas prices should rise to above $4.00/MMBtu during the summer months
The report stated that most regions are expected to exceed planning targets for reserve margins in the summer months; however, Texas is expected to fall below its planning target. In addition, the report highlighted that load across the U.S. is expected to rise less than one percent. The report also noted that capacity will remain low in South Orange County and San Diego due to the continued unavailability of the San Onofre Nuclear Generating Station. Because of this, FERC staff expects greater price volatility in California and will monitor the region for any manipulative behavior. Finally, the report highlighted that natural gas forward prices have dramatically increased from last summer’s prices. Due to this increase, the report predicted that less displacement of coal fired generation will occur this summer compared to last summer.
A copy of the report is available here.
Filed Under: News, Policy