The dynamics of energy pricing
Spot market influences prices, but doesn’t control them
PGE’s latest forecast for 2010 indicates prices for large nonresidential customers will decrease 3 to 4 percent in January. You may have read some national articles recently about big declines in wholesale electricity prices and wonder how that would effect your PGE pricing. To begin with, many of the articles that appear in publications such as the Wall Street Journal focus on eastern states, which have had much higher-priced power than the West. Many of the eastern markets are deregulated, which can contribute to greater price swings.
Here in the West, we’re not seeing the same drop in wholesale electricity prices that is happening back East — especially during peak usage times. The price per megawatt-hour in eastern states is now near what the price is here in the Northwest (about $40 per MWh). The price had been around $66 per megawatt-hour a year ago.
Dramatic price swings in the spot wholesale market don’t immediately translate into lower prices for utility customers. PGE works to maintain stable prices by generating its own power as well as purchasing power under long-term contracts. This approach serves as a buffer against price spikes, but it also delays the effect of wholesale price drops.
In addition, many reports you may read refer only to wholesale energy prices at the source. What you receive from PGE is a delivered product. In addition to the energy itself, you receive other services, which contribute to the reliability of your electric power, such as:
- Maintenance and upgrades to the PGE transmission and distribution systems
- Maintenance and operation of power plants
- Fuel for power plants: natural gas and coal
- Customer service and administration
To keep prices stable, and to keep your power reliable, PGE maintains a balanced portfolio of generation sources. It’s not wise to put all of your eggs in one basket, so we make electricity six different ways (hydro, natural gas, coal, wind, solar and biogas). We constantly work to minimize costs and keep prices as low as possible.
We currently estimate a 3 to 4 percent price decrease for large commercial and industrial customers for 2010. Check the Pricing Plans section for updated pricing forecasts.