Wholesale electricity rates in New York hit a high of $1,448/MWh on July 18th, just hours before strong thunderstorms brought a temporary reprieve from the summer’s punishing heat. The total system peak demand for electricity was expected to near 33,000 MW for the day.
Operators asked certain industrial electricity consumers in NYC to curtail usage between the hours of 1:00pm and 6:00pm to ensure there was enough capacity to meet more critical energy needs. The users that were asked to cut back on usage are part of a demand response program that enlists certain large users of electricity to agree to cut back usage during peak demand periods in exchange for rate reductions or outright payments.
Nationwide the recent extreme weather is just one factor that has been putting upward pressure on electricity rates. Despite the continued drop in natural gas prices, electricity rates in New York,Texas, and other deregulated states have bottomed out and started moving upward.
The reasons are as complicated as the electricity market. Natural gas has fallen over 40% from last year but the price of fuel is only one input in determining electric rates. Delivery costs make up a large portion of the price consumers pay for electricity. These infrastructure cost are rising quickly. This added cost burden is passed on to commercial and residential electric consumers.
Lower natural gas prices have resulted in lower wholesale electricity rates. This has resulted in financial pressure on producers and given them less incentive to build new capacity. In order to incentivize producers to build more plants, rule makers have taken steps to increase wholesale rates — such as the move in Texas to raise wholesale rate caps by 50% with plans to increase them even future.
New York Electricity rates are about 50% higher than the national average according to numbers published by the EIA.