Lower natural gas prices pull down NE power costs

Lower natural gas prices help pull down New England electricity prices by 23 percent in 2012

Associated Press

BOSTON (AP) -- Falling natural gas prices helped drive down New England's electricity prices by nearly a quarter last year, according to a report released Wednesday by the region's power grid operator.

The 2012 Annual Markets Report by the ISO New England said natural gas-fired power plants generated just over half of the electricity produced in the region last year, a more than three-fold increase in the percentage of power they generated compared with 2000.

So a nearly 20 percent decline in the average price of natural gas in 2012 helped pull down wholesale electricity prices 23 percent, in what the ISO said was the acceleration of a recent trend.

"There is a clear linkage between the cost of fuel and the price of electricity," said David LaPlante, the ISO's vice president of market monitoring.

The report noted that the flip side of lower prices — increased demand for natural gas for heat, as well as power — continued to strain regional pipeline capacity. It said at times last year, natural-gas fired generators couldn't operate because the fuel wasn't available.

The report makes various recommendations aimed at better ensuring sufficient supply, including market and rule changes that aim to give gas suppliers more time to procure needed fuel.

The report also showed a nearly 1 percent year-to-year drop in electricity consumption in 2012, which the report said also helped pull down prices.

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