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New England Wholesale Electricity Falls to 13-Year Lows

March 6, 2017

ISO New England, the operator of New England’s power grid, reported last week that 2016 wholesale electricity prices in the region fell to their lowest since 2013. Cheap natural gas and lower consumer demand for electricity contributed to the fall in prices. ISO New England noted that, according to the Energy Information Administration, 2016 natural gas prices in the US fell to $3.09 per million British thermal units, their lowest since 1999. The decrease in natural gas prices was due in part to mild weather. Natural gas is the primary fuel used by New England’s power plants, so natural gas prices are a significant determinant of electricity prices. When the region’s natural gas prices are low, its electricity prices are also low. Mild weather also reduced consumer demand for electricity, which decreased by 2.1 percent in New England in 2016.

In its report, ISO New England indicated that the average wholesale price of electricity was $28.94 per megawatt hour in 2016, which is down 29.4 percent from 2015. The value of the wholesale electricity market totaled $4.1 billion in 2016, which is down 30 percent from 2015 and well below the $5.2 billion value in 2012. Wholesale prices are what power generators receive for the electricity they integrate into the grid. Retail prices, the prices customers pay, are higher because they include other charges like transmission, distribution, energy efficiency, and customer fees. Lower wholesale electricity prices usually translate into lower retail prices.