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even in these areas, the average on-peak premium was only $2/MWh more than the value of power at the lowest value locations.
In fact, the highest prices in ComEd this past summer were not in the ComEd region at all, but at ComEd's interfaces. The highest-priced interface was the export interface with the New York ISO at $58.36/MWh. ComEd's interfaces with Wisconsin Electric and Illinois Power followed close behind at just over $55/MWh. While exporting power to New York is not a likely transaction, exporting to Wisconsin and Southern Illinois is common. Transmission costs to these regions were higher this summer. This might be expected given that ComEd has a reserve margin of just about 30 percent, and neighboring regions, especially Wisconsin, have lower reserve margins. Many of ComEd's neighbors are net importers of power.
A Cool Summer
Part of the explanation lies in an unusually cool summer for 2004. Using the standard measure of cooling-degree days (CDD) for the period June through August we see total CDD of 442. By comparison, 2002 and 2003 had CDD totals of 845 and 602, respectively. In fact, one needs to go back to 1992 to find a cooler summer. Typical summers in Chicago have 671 CDD.
Not only was the summer of 2004 cool on average, but there was a noticeable lack of extreme days, too. Daily high temperatures extended into the low 90s only 3 times, none of which occurred during peak hours. Over the same period in 2002, temperatures reached the 90s for 21 days including several extended hot spells.
What If It Were Warmer?
Because 2004 was such a cool year in the ComEd region, we estimated what prices would have looked like in the summer of 2002. As shown in Figure 4 (), the number of CDD in 2004 was 442 compared with 845 in 2002. The difference can also be seen in Table 1, which shows the distribution of temperatures at Chicago O'Hare in 2002 and 2004. Note that for each temperature range greater than 74 degrees, 2002 had a higher percentage of on-peak hours in the range compared with 2004. Note also that more than 20 percent of the on-peak hours in 2002 had temperatures at 85 degrees or above, compared with less than 2 percent in 2004.
We wondered how the ComEd market might heat up during a summer like 2002. To estimate the impact on prices, we calculated, by temperature range, the average and standard deviation of the real-time, on-peak LMP for the ComEd zone as shown in Table 2 (). Assuming that during a summer like 2002 the average price would be similar within each temperature band, we calculated a weighted average and standard deviation of the price (weighted by the percentage of hours in each temperature range). In 2004, the weighted average price and standard deviation were $39.98 and 19.7 respectively. For a year like 2002, we estimated an average on peak price of $48.63, or about 20 percent higher. Likewise, we estimated that prices would be more variable, as indicated by the higher