Intraday gas pricing provides winter PJM price insights

Market: Electricity, Natural gas
26/02/24

Real-time natural gas sales to power generators in the service area of American Electric Power (AEP) have been higher than day-ahead gas indexes so far this year, an Argus analysis has found.

Generators in the PJM Interconnection electric grid submit offers to clear the power markets based mostly on fuel costs and heating efficiencies, though other factors can move prices. If those generators buy real-time gas on a day-ahead index that is not yet published, they have a rough idea of fuel costs but still take some price risk.

The Argus indexes for real-time implied PJM prices are the marginal cost of

natural gas for a gas-fired power generators in the different zones of the interconnection.

Argus calculates these prices assuming zero profit margin for generators, using the variable operating costs and the heat rate of the generator and using zonal hourly dispatch electricity prices from PJM.

The implied real-time prices for 2024 show that generators in the AEP zone could have paid amounts higher than day-ahead indexes and their plants still would have been dispatched.

For the first seven weeks of the year, gas delivered for power in the AEP area for real-time generation was worth an average of 95¢/mmBtu more than the daily index for Columbia Gas, Appalachia.

However, capturing gas values based on power prices cleared in PJM would not have helped sellersin the large utility zone Baltimore Gas & Electric (BGE). In the BGE service area, the basis relationship between real-time delivered gas prices and the predominant day-ahead index, Transco zone non-New York, changes frequently. Neither purchasing strategy has an advantage. So far this year, real-time gas is worth 69¢/mmBtu less than the average of the daily index.

The value of real-time gas would have been higher without the mid-January bout of extreme cold in much of the country. Columbia Gas supply exceeded $15/mmBtu for delivery on 13-16 January, and implied AEP real-time gas prices did not follow at that level.

In the BGE area, both traditional daily indexes and implied gas prices rose during the cold wave.

By David Givens

Col Gas Appalachia vs AEP intraday $/mmBtu

Transco zone 6 nonNY vs BGE intraday $/mmBtu

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