July 2, 2022 - PJM Interconnection wholesale power prices were nearly 200% higher on the year in June and between 12% and about 25% higher on the month with hotter summer weather increasing power demand by nearly 20% on the month. The forward power prices for July were over 300% higher than year-ago levels.

PJM West hub on-peak real-time power prices averaged $112.15/MWh in June, about 212% higher than the June 2021 average of $35.94/MWh, and almost 36% higher on the month, according to PJM data compiled by S&P Global Commodity Insights.

PJM West hub on-peak day-ahead power prices averaged $101.66/MWh in June, nearly 183% higher on the year and about 12% higher on the month.

Northern Illinois hub on-peak real-time power prices were 152% higher on the year in June to average $102.46/MWh and were about 33% higher on the month. On-peak day-ahead power prices at the hub averaged $98.94/MWh during the month, which was about 175% higher on the year and 26% higher on the month.

AEP-Dayton hub on-peak real-time power prices averaged $112.80/MWh in June, roughly 177% higher on the year and about 33% higher on the month. The maximum daily average real-time on-peak power price at the hub during the month was $535.88/MWh on June 13 when extremely hot weather in the region combined with severe thunderstorms to drive up demand and knock out several transmission lines. The resulting transmission line congestion and high loads led to localized power price spikes.

PJM East hub power prices were lower than the other major hubs in June, with on-peak real-time prices averaging $78.02/MWh which was about 143% higher on the year and 22% higher on the month. On-peak day-ahead power prices at the hub averaged $70.42/MWh, about 105% higher on the year and just 3.4% higher on the month.

Spot natural gas prices at the Chicago city-gate hub averaged $7.42/MMBtu in June, almost 138% higher than the June 2021 average of $3.12/MMBtu. Spot gas prices at the hub were down by 4.8% on the month.

Spot Texas Eastern gas prices averaged $6.92/MMBtu in June, about 173% higher on the year, while spot gas prices at the hub were 5.8% lower on the month.

PJM power demand increased in June with the onset of hot summer weather. Peak load averaged 113,398 MW, a 19.8% increase from the May average of 94,641 MW. Average peak load in June was 2.4% lower a year ago when it averaged 116,135 MW, according to PJM data.

Peak loads were driven up in June by warmer temperatures with the high temperature in PJM territory averaging 82.2 F compared with an average high of 73.6 F in May, according to CustomWeather data.

The average low temperature in June was 63.9 F compared to a May average low of 57.1 F, which corresponded to a decrease in average heating degree days from 3.1 in May to 0.1 in June. Similarly, cooling degrees days increased to an average of 7.8 in June from 3.4 in May.

Power Generation Fuel Mix

"Coal-fired generation will likely decline by nearly 30% year on year in June as several large coal units retired in the last 12 months, including Morgantown Unit 1 and Unit 2, totaling over 1,200 MW and the 1,300 MW Zimmer plant," S&P Global power analysts said in a June 30 research note.

Coal-fired power generation was unchanged from May to June, accounting for 18.8% of the fuel mix, according to PJM data. Coal-fired generation was down on the year from June 2021 when it accounted for 24.9% of the PJM generation mix.

Gas-fired power generation accounted for 41.2% of the fuel mix in June, up from 36.4% in May and 36.7% in June 2021.

Nuclear power declined slightly in June to account for 32.6% of the fuel mix compared with 35.5% in May and hydropower declined as well from 2.4% of the May generation mix to 2.0% in June.

Wind power accounted for 2.6% of the June fuel mix, down from 4.3% in May.

"Renewables will also replace a large portion of the reduced coal output as on-grid renewables generation increases by 1.3 aGW to nearly 5 aGW in June," the S&P Global analysts said.

Forward Power, Gas Prices

Wholesale power prices are expected to remain elevated as fuel prices remain high into next year, according to the research note.

PJM West hub on-peak forward power prices for July averaged $164.55/MWh in June trading, according to Platts M2MS data. That is just over a 307% increase on the year, but also a 3.72% decline on the month. The August contract averaged $145.43/MWh and forward power at the hub for September averaged $118.90/MWh.

AEP-Dayton hub forward power prices for July averaged $168.48/MWh in June trading, up 301% from $42.01/MWh in June 2021. Forward power for August averaged $147.73/MWh, up 265% on the year and the September contract averaged $121.60/MWh, up 214% from year-ago levels.

Platts Transco Zone 6 Non-New York gas prices for July averaged $7.00/MMBtu, up 163% on the year. The August contract averaged $6.84/MMBtu and forward gas at the hub for September averaged $6.22/MMBtu.

"Gas prices will average close to $6/MMBtu over the last six months of this year, then peak at over $10/MMBtu at Tetco M3 in January 2023 before subsiding into the $4/MMBtu range in the spring of 2023," S&P Global said.