Short-Term Price Benchmark Trends
The ERC national average benchmark price for retail electricity slightly increased again last week by 1.1% to $0.0728 per kilowatt hour. Prices increased in each restructured market, except Texas, which remains the market with the lowest average benchmark price for retail electricity. The biggest price increases last week were in Delaware (3.4%), Maryland (2.4%) and New York (2.0%). Despite increasing weekly average benchmark prices for retail electricity, prices are slightly lower than four weeks ago in Connecticut, Maine, Massachusetts, Pennsylvania, and Rhode Island. 
Long-Term Price Benchmark Trends
The U.S. has experienced colder-than-normal temperatures so far in April. The National Oceanic and Atmospheric Association’s weekend forecast projects about two-thirds of the U.S. will see below-normal temperatures into the first week of May. This should continue to generate above-normal heating demand, and further limit injections into natural gas storage.
Seasonal peak supply that one month ago was expected to top the 4.1 trillion cubic feet level is now looking out of reach. Increase in supply during the first half of April only amounted to 4.0 billion cubic feet (Bcf), compared to the five-year average increase of about 45 Bcf, and to last year’s strong supply upswing of about 78 Bcf.
Looking forward, some long-term weather outlooks are beginning to favor a warmer-than-usual summer across the northern half of the U.S. This would likely increase cooling demand, and draw down natural gas supplies. Prices are usually highest in the summer when total demand is high, and when more expensive generation is added to meet increased demand.
U.S. production of dry natual gas continued its slide for the fourth straight week, averaging just 71.2 Bcf per day last week, down 0.3 Bcf per day from the previous week. This marks the lowest weekly production average so far in 2016. 
The May 2016 natural gas futures contract price gained 7.2 cents on Friday of last week, settling at $2.140 per million British thermal units (MMBtu), a 12.5% week-over-week increase. The 12-month strip was up almost 22 cents over the previous week, a 9% hike. Despite record-high natural gas storage levels at the end of the storage withdrawal season, concerns about a storage glut later this summer are starting to wane, as production woes and rising demand from summer heat should work to tighten the supply-demand balance. All of this is likely to move natural gas and retail electricity prices upward as we move into the summer season.
Jim has been CEO of several research companies including TDC, a subsidiary of International Thomson; Highline Financial, a Thomson-Reuters company; and Mentis Corporation, which was acquired by Gartner Group. He has also served as executive director of The Global Futures Forum, an international think tank, and as managing director of Gartner Group’s Global Financial Services practice. Price Benchmark Changes Wk Ending 4-15-16 
*The weekly average price benchmarks are derived from a standardized database of daily matrix prices issued by many electricity suppliers. The database is updated every business day and includes prices issued from September 2013 forward. The benchmarks are derived by aggregating individual supplier prices across the General Service tariff rate classes for each electric utility, and then averaging the utility price benchmarks together for a state level benchmark. Price Benchmarks National Average Wk Ending 4-15-16
Finally, these state level benchmarks are averaged across the five business days of each week to create the weekly average price benchmarks by state. These benchmarks reflect the average prices for General Service tariff rate classes by utility and state, based on next month’s start date. As mentioned, these benchmarks are based on matrix prices for commercial customers with an annual usage of up to 1 million kWh. While they are not a valid measure of pricing for larger C&I customers, the high level of correlation between matrix and custom pricing make the benchmarks a reliable measure of how prices are trending, as well as the direction and velocity at which prices are changing week-over-week and month-over-month. This is similar to how the S&P or Dow measures the rate and direction of change in stock market prices over time.
