By Shelby Webb STAFF WRITER
Wholesale electricity prices increased across the country last year, driven primarily by soaring natural gas prices but also with contributions from the Texas freeze, according to a report by the Energy Information Administration.
Texas and last February’s winter storm played a role in pushing average wholesale prices higher last year, the Energy Department said. Between Feb. 14 and 19, when power plants cascaded offline amid falling temperatures, the hourly price of power in markets overseen by the Electric Reliability Council of Texas, the manager of the state’s electricity grid, soared above $6,000 per megawatt-hour 70 percent of the time.
As a result, wholesale cost of electricity in Texas averaged $1,485 per megawatt-hour in February 2021. ISO New England, which serves six states in the Northeast and logged the second-highest prices for wholesale power that month, saw prices rise to $73 per megawatt-hour.
Higher wholesale prices typically trickle down to household power bills. In October, average prices on the state’s retail electricity shopping site Power to Choose were up about 50 percent to 12 cents per kilowatt-hour from about 8 cents a year earlier, the Houston electricity shopping service Real Simple Energy estimated.
Texas’ freeze also contributed to higher wholesale power costs rising nationally, the Energy Department said, because the price of natural gas spiked as a result. Natural gas during that week in February neared the record price set in 2003 after an Arctic blast swept across the country.
In 2003, the cost of natural gas rose to $26.50 per million British thermal units, and in February, it rose to $23.86 per million Btu before falling to $2.87 in March.
Natural gas is the leading fuel for power generation, and electricity prices typically track gas prices. The cost of natural gas had been relatively low in the past few years, averaging about $2.40 per million Btu in 2020.
The average price climbed to $3.19 per million Btu in January 2021 and $5.04 in the last quarter of 2021 — more than doubling in less than two years.
Demand for natural gas has soared worldwide as nations switch power generation and other industrial operations from coal to lower greenhouse gas emissions accelerating climate change.