Natural Gas Price Spikes, Availability Drove Electric Rate Spikes Senate Committee Told

Frederick Bresler, Vice President of Market Operations for PJM, said Tuesday severe winter weather caused record natural gas price spikes and delivery problems that were responsible for about half the electric generation outages on the coldest day of the winter on January 7 forcing the cost of electric from an average of less than $40 per MwH to more than $1,000 per MwH for suppliers, higher than the cap PJM allows generators to charge.

Bresler’s remarks were made before the Senate Consumer Protection and Professional Licensure Committee during a hearing to look into the causes and potential solutions to the electricity price spikes consumers suffered during the coldest parts of this past winter.

Natural gas prices during January were spiking from $60 to $100 per MMBtus, when the average price was below $5 per MMBtus a few weeks earlier, according to Bresler.  

Twenty-two percent of the PJM’s electric generation capacity was forced out of operation on January 7 due to mechanical breakdowns or natural gas fuel shortages, according to Bresler.  Of the 40,000 MW of forced outages, 9,700 MW were due to natural gas unavailability, 9,300 MW from natural gas delivery curtailments totalling 19,000 MW.  13,700 MW of coal-fired power plants and 7,500 MW of other generation were out for mechanical breakdowns.

Bresler did note increased natural gas penetration into electric generation has already reduced the wholesale price of electricity by nearly half, but there is a need to address electric generation coordination and natural gas infrastructure to make it as available as possible.  

Click Here for a copy of Bresler’s presentation.

In response to a question from Sen. Lisa Boscola (D-Lehigh), Minority Chair of the Committee, Bresler said PJM’s counterpart in New England did not experience the same sort of volatile price spikes because they were able to require generators to switch from natural gas to back up fuels like oil.  As a result, Bresler said PJM is investigating whether it should implement a minimum require quantity of natural gas supply or back up fuel for generators.

Sen. Robert Tomlinson (R-Bucks), Majority Chair of the Committee, expressed concern about the closure of coal fired power plants in Western Pennsylvania and whether the PJM grid can handle the closures.  

Bresler said PJM’s electric transmission problems are usually west to east and acknowledged natural gas delivery problems are affecting eastern electric generation, which he indicated will be alleviated by planned  pipeline expansions to be completed in the next several years.

Robert Powelson, Chair of the Public Utility Commission, said the Commission has received more than 12,200 inquiries from customers who saw a 12-fold increase in their electric bills over last year’s costs.  He summarized the steps the PUC is taking to require additional disclosures for customers so they can make better decisions about rates offered by electric suppliers.

In the case of the rate spikes, Powelson said there is the need for natural gas and electric coordination pointing out there are no pipelines from the natural gas development regions of Pennsylvania to the urban areas like Philadelphia.

Testimony on the variable electric rate issue was also provided by Tanya McCloskey, PA Consumer Advocate, John Evans, PA Small Business Advocate, Leah Gibbons, Director of Regulatory Affairs for NRG Retail Northeast, Ron Cerniglia, Director of Governmental and Regulatory Affairs for Direct Energy, Dennis Urban, Vice President of Finance and Regulatory Affairs for PPL Electric Utilities,  Charles Fullem, Director of Rates and Regulatory Affairs for FirstEnergy and Dick Webster, Vice President of Regulatory Policy and Strategy for PECO.

A video of the hearing is available on the Committee website.

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