Texas markets

FERC to watch gas and power market manipulation as summer power futures spike 233%

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Diving Brief:

  • With wholesale electricity prices expected to soar this summer, the Federal Energy Regulatory Commission will be closely monitoring the natural gas and electricity markets for possible market manipulation, according to FERC Chairman Richard Glick.

  • Industry executives told Glick that the recent surge in natural gas prices is not fully supported by market fundamentals, he said, noting the agency has jurisdiction over abuse. in gas markets. “It’s something we have to consider and look at,” Glick said Thursday at FERC’s monthly meeting.

  • Mirroring a trend in other regional markets, on May 13, forward power prices in the PJM interconnection averaged around $130/MWh from June to September, up 173% from $47.64/MW, last year’s established average price for the same period, FERC staff said. in a summer report released Thursday. Futures prices are driven by rising natural gas prices, expectations of a warm summer and a slight increase in demand, FERC staff said.

Overview of the dive:

Natural gas prices typically help set wholesale electricity prices, and both are booming, according to the FERC report.

Average futures prices at the Henry Hub, a key trading hub in Louisiana, jumped 88%, to $7.06 per million British thermal units, from May to September, compared to the average price for the $3.75/MMBtu last summer, FERC staff said.

Natural Gas Futures Prices in Select Trading Centers

Extract of Federal Energy Regulatory Commission May 20, 2022

The rise in gas futures prices appears largely driven by forecasts of a tight balance between supply and demand, with liquefied natural gas exports being a major source of demand growth, according to the report.

“Really, everything is LNG, and I think we know the demand for LNG is not going to go down. It’s going to keep going up,” Glick said. “Obviously this has a big impact on electricity prices.”

U.S. natural gas exports are likely to increase this summer, primarily due to international demand for LNG, the report said. The US Energy Information Administration expects LNG exports to average 11.8 billion cubic feet per day in June, July, August and September, up from 9.5 billion cubic feet per day last summer, said FERC staff. Exports would account for about 12.2% of the projected 96.9 billion cfd of natural gas production in the United States over the summer.

FERC staff expects that higher gas prices, combined with higher forecast temperatures, will put upward pressure on electricity prices.

June-September power futures prices in California, New England and Texas markets are up 77% to 223% from prices set last year, staff said. the FERC.

Market factors such as increased LNG exports are affecting natural gas prices, Glick said during a conference call with media.

“There are certainly market fundamentals that support price increases from where they were last summer, but [industry executives] say it’s a lot higher than it should be,” Glick said. “So that’s something we’re looking at, but I don’t want to suggest that we’ve found anything.”

FERC is also continuing to investigate possibility of market manipulation during last year’s winter storm Uri, according to Glick.

“We found anomalies, so it’s under investigation,” Glick said. “They are still reviewing all of the allegations, the evidence that has come forward, and staff will make a recommendation to the commission at some point as to whether or not to proceed with full enforcement proceedings.”

The agency also monitors power markets for potential market abuse, Glick said.