Electricity price rise is forecast

U.S. wholesale electricity prices are "likely to be higher" this summer in all regions because of an expected increase in natural gas costs, a report by staff of the Federal Energy Regulatory Commission showed.

"Markets are signaling double-digit electricity price increases this summer over last, with natural gas as a clear driver," Steve Harvey of the commission's enforcement office said at a commission open meeting yesterday in Washington.

Forward power prices for the summer are up 20 percent to 30 percent, and natural gas prices are up 21 percent from last summer's actual average prices, he said.

Prices for most wholesale power fell last year because of lower natural gas prices and abundant hydroelectric power, Harvey said. That drop in prices came during the second-warmest summer recorded by the National Oceanic and Atmospheric Administration, he said.

"Natural gas currently functions as the most significant price-setting fuel in U.S. electric generation," Harvey said.

The amount of power generated by natural-gas-fired plants has grown almost 75 percent since 1996, and it now contributes about 20 percent of U.S. supply, according to data from the Energy Information Administration.

Harvey said natural gas was the "pivotal fuel" for power in many regions, meaning power prices tend to be set at levels that reflect gas use and prices.

"Natural gas prices affect power prices in all regions, notwithstanding market structure," said Joseph Kelliher, chairman of the commission.