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Energy Prices Always Go Up (Part 4)

As discussed several times previously on this blog, there is a common perception that energy prices always go up.  We have examined both natural gas prices (read here and  here) and electricity prices (read here).

In this post, we look again at electricity prices—specifically, how they behaved in PJM last year.

PJM zonal day-ahead load weighted average Locational Marginal Prices (LMPs) averaged $50.92 per megawatt-hour (MWh) during 2010 and $45.19 during 2011, an 11.3% decline.  During 2012, this weighted average price dropped to $34.55 per MWh, a further 33.6% decline.  This is a stunning decrease and was driven primarily by the decline in natural gas prices.  Electricity and natural gas prices are strongly correlated in PJM as natural gas-fired generating units are generally the marginal units called upon in PJM’s least cost dispatch model.

LMPs vary significantly by zone, as shown on the graph below.

The change in average LMPs between 2011 and 2012 varied by zone but, in all cases, was lower during 2012.  The decline ranged from 19.4% in the Commonwealth Edison zone to 35% in the Atlantic City Electric zone.  A sampling of zonal price changes is presented in the table below.

The overall decline can also be seen in the further contraction of prices into the lower end of the frequency distribution shown below.

From January 2007 to December 2012, Day Ahead LMPs in PJM averaged $46.57 per MWh.  This corresponds to the period during which PJM has in place its capacity market model, referred to as its Reliability Pricing model (RPM).  Current LMPs are well below this average, as shown in the graph below.

The LMPs plotted above are in nominal dollars and do not take into account inflation.  The effect of inflation can be illustrated by increasing the right side of the red line relative to the left side.  In other words, in real dollars, the decline in electricity prices in PJM is more dramatic than shown.

Do energy prices always go up?  The answer remains “no” as it relates to electricity and natural gas prices.

The Avalon Advantage – Visit our website at www.avalonenergy.us

Copyright 2012 by Avalon Energy® Services LLC

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Avalon Energy Services Completes New Energy Supply Contracts on behalf of Donohoe Real Estate Services

BETHESDA, Md., May 14, 2013 – Avalon Energy Services, the Mid-Atlantic’s leading energy consulting firm, announced today that they successfully completed an electricity procurement for 19 commercial real estate properties managed by Donohoe Real Estate Services. The properties are located in Maryland and the District of Columbia.  Under the new contracts, the properties will save more than $1.5 million per year on electricity supply costs.

“We are pleased to assist the premier firm of Donohoe Real Estate Services in obtaining such great savings,” said Jim McDonnell, Chief Operating Officer of Avalon Energy.

Tim Gallagher, President of Donohoe Real Estate Services, noted “At Donohoe, we have a more than century long tradition of creating value for our tenants and our property owners.  Working with Avalon Energy has allowed us to further build upon this tradition.”

Avalon Energy Services, LLC (Avalon Energy) provides a range of energy consulting services to commercial, industrial, institutional, and government customers.  Services include consulting related to energy procurement, energy audits, demand side management, and the implementation of distributed generation and combined heat and power (CHP) applications.  Avalon Energy’s website is www.avalonenergy.us.

Founded in 1884, The Donohoe Companies is the oldest full-service real estate organization in the Washington, DC region and also one of the largest — ranked in the top 50 private companies in the metropolitan area.

Donohoe has invested billions of dollars in Washington’s premier office, hotel, retail, industrial, and residential projects.  In addition, Donohoe provides a full range of building management, brokerage, and maintenance services to major institutions, corporations, and associations.

Today, guided by a fourth generation of the founding family, Donohoe remains committed to the basic values of excellence, integrity, and customer satisfaction. The philosophy and tradition that has brought Donohoe over a century of success continues to be the foundation of their business approach — hard work, fair play, and the willingness to take reasonable risks with prudent provision for the future.   For more information, please visit Donohoe’s website at www.donohoe.com.

Contact:

Jim McDonnell                                                Kevin Furnary

Chief Operating Officer                                 Senior Consultant

Avalon Energy Services, LLC                    Avalon Energy Services, LLC

888-484-8096, ext 202                               703-868-5677

jmcdonnell@avalonenergy.us                   kfurnary@avalonenergy.us

The Avalon Advantage – Visit our website at www.avalonenergy.us

Copyright 2012 by Avalon Energy® Services LLC