Federal Government uses UPLAN model to examine price volatility in ERCOT

LCG, October 11, 2022--The U.S. Energy Information Administration, or EIA, released its latest supplement to the Short-Term Energy Outlook (STEO) in the Texas market, assessing various possible scenarios using LCG’s UPLAN NPM model, with a special focus on the effects on wholesale power prices and market conditions.

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Michigan Governor Supports Reopening Palisades Nuclear Facility

LCG, September 16, 2022--The Governor of Michigan last week sent a letter to the U.S. Department of Energy (DOE) in support of Holtec International’s application for a federal grant under the Civil Nuclear Credit (CNC) program to save the Palisades Nuclear Facility in Southwest Michigan. The federal grant could result in restarting the baseload, carbon-free, nuclear power plant.

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Industry News

Natural Gas, Power Prices Boosted by Lack of New Gas Production

LCG, Feb. 28, 2003--The price of natural gas retreated slightly late this week from levels as much as two to five times what had been considered typical, but it is quite possible that the "typical" price level will be somewhat higher for the next few years.

March natural gas on the New York Mercantile Exchange was priced at $10.90 per million Btu on Monday, whereas it had been $6.60 the previous Friday. Low inventories are largely the cause, based on a sharp reversal from mild winters in the past few years to a very cold one that in the Energy Information Administration's estimation has left about one-third less gas in storage compared with the five-year average.

Consumption has increased because of more gas being used for heating generally, and by the fact that the majority of new power production capacity uses gas. According to the chief executive of the New York Independent System Operator, plants capable of substituting fuel oil for gas are doing so to cut costs. This week, the premium paid for gas led wholesale electricity prices to reach $990 per magawatt-hour several times in Texas, which has had severe winter weather recently. New York City prices reached $175 per megawatt-hour.

Poorer credit ratings among power companies and utilities have contributed to higher prices as well. Companies that explore and drill for gas have not had enough new, stable production to keep inventories from declining. In fact, production fell last year by 5.5%. The trend is expected to continue until 2005, in the view of Lehman Brothers. Canada's own increased use of gas has not allowed imports from that source to grow, and those wells that have been drilled have been of a more marginal nature, and are often quickly depleted.
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