You've heard talk lately about the convergence of electricity and natural gas. That idea has grown as commodity markets have matured for gas and emerged for bulk power.
The Commodity Futures Trading Commission (CFTC) has approved the New York Mercantile Exchange (NYMEX) applications for electricity futures contracts on delivery at the Palo Verde Switchyard in Arizona and at the California-Oregon border (COB).
Both contracts use a unit of 736 megawatt-hours (Mwh) delivered over one month. The delivery rate is 2 megawatts in every hour of the delivery period of 16 onpeak hours (0600 to 2200 hours). Both the rate and the period may be amended by mutual agreement of the buyer and seller. Trading in the delivery month will end on the third business day prior to the first day of the delivery month. Prices will be quoted in dollars and cents per megawatt-hour, with a minimum fluctuation of $.01/Mwh and a maximum of $3.00/Mwh above or below the preceding day's settlement price. Expanded limits will apply when the contract settles at the maximum limit. Buyers and sellers must follow the Western Systems Coordinating Council scheduling practices.
The contracts will be traded on the NYMEX division of the exchange. According to the terms of the NYMEX/COMEX merger, COMEX division seat owners must trade the contracts proprietarily for two years.
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