Wholesale Electricity Prices Fall by 51 to 77%

Unadjusted daily data.

10-day moving average.

20-day moving average.

30-day moving average.

I received a number of comments on my earlier post, along with some accusations of "data mining" for showing only the raw data (see top chart above), and not showing adjusted, moving-average data. OK, OK, but please keep in mind that there are only so many hours in the day, and finding raw data and creating charts is pretty time-consuming, and I have many other obligations, so I didn't have time to make adjustments to the data.

Today I found the time, and the bottom three charts above show adjusted wholesale electricity data for the 10-day moving average (-61.3% decline from the July peak), the 20-day moving average (-57.1% decline from the peak) and the 30-day moving average (-51.1% from the peak). In all cases, the current wholesale electricity price of $47.38/MWh is close to a four-year low, and will likely continue to fall.

Bottom Line: Wholesale electricity prices, along with with oil, gasoline and natural gas prices, have fallen significantly since the summer 2008 peaks. Whether the decline in wholesale electricity is -50% or -77% seems less important than the fact that the decline is significant, and energy price declines for oil, gasoline, natural gas and electricity will create significant savings (billions of dollars) for consumers and businesses in the coming months.

Comments

[thethoughtc...:]

Electricity demand is seasonal. Look at year-over-year, not moving averages, whether 10-day, 30-day, or otherwise. Clearly demand may fall due to shrinking industrial output and pinched residential consumers. The bigger question for investors is the extent of the fall, which your moving averages overstate; just look at the late-Fall of 2006 to see that demand is still seasonally normal.

2008 Nov 10 09:31 AM

[Paul Killinger:]

Mark,

The overall savings in the electricity and transportation sectors will be several hundred billion dollars annually, if not more.

Unless, of course, the new administration goes ahead with its plans for some sort of cap and trade. This could cut these proposed savings significantly, and stall out any economic recovery at the same time.

This would also mean we have four more years of recession ahead of us at least. However, this will allow us the time to find our next Ronald Reagan to reverse our demise. My early choice is Newt Gingrich.

We'll see.

2008 Nov 10 10:58 AM

[edm1949:]

I have an offer from my utility to lock in my retail electricity price for 24 months at the current rate (as of 11/08). Does this expected wholesale price decline look like it will hold through that period?

2008 Dec 11 10:07 AM