The future contract for July delivery at cinergy remains at levels reminiscent of last year's prices. At one point the contract reached $170 per megawatt-hour, matching last year's actual average price during June and July. High forward contract prices such as this show that market traders believe that spot prices for electricity will again be sent to four-digit levels.
Three primary factors led to last year's price spikes. First, nearly 23 percent of the capacity in the Midwest was unavailable during June. Second, temperatures reached abnormally hot levels on consecutive days and loads were substantially higher than anticipated. Third, problems in one area of the transmission system quickly became problems in other areas as tight supply/demand conditions limited the ability of utilities to shift generation to meet load. These shifts caused overloads on the transmission system, which resulted in the need for line load relief.