Texans cranking up their air conditioners to battle a heat wave are spurring the highest electricity prices since the so-called polar vortex brought frigid arctic air into the U.S. 18 months ago.
Spot on-peak wholesale power on the state grid has averaged $66.84 a megawatt-hour so far in August, the most since the comparable period of February 2014, according to data compiled by Bloomberg.
“The last couple of days have gone like we wanted,” Michael Poray, senior vice president of commercial operations in Dallas at Panda Power Fund, a private equity firm that invests in gas- fired power plants, said in an Aug. 11 interview.
The surge in August heat followed heavy rainfall and widespread flooding that depressed spot power in May, June and July to the lowest seasonal levels since 2012.
“We typically have a 100-degree day sometime around the middle of June and we didn’t hit that until we got into July,” Poray said.
Power prices surged across much of the U.S. in the first quarter of 2014 after waves of frigid weather boosted natural gas demand to record levels as homeowners burned more of the fuel to stay warm. Demand typically peaks during the hot summer months.
The high in Houston on Feb. 6, 2014, was 41 degrees Fahrenheit (5 Celsius), 24 below normal, according to AccuWeather Inc. The high on Aug. 11 this year was 104, 11 above normal.
Consumption on the state grid soared to records three times so far this month, peaking at 69,783 megawatts on Aug. 10, according to the Electric Reliability Council of Texas Inc., which manages most of the state’s grid.
Even as demand surges, power prices are far from matching the August 2011 average of $210 a megawatt-hour, thanks to low fuel costs. Spot gas at the Katy hub near Houston has averaged $2.75 per million British thermal units so far this year on the Intercontinental Exchange, compared with $4.26 during the same period of 2011.
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