Proving market performance requires detailed analysis.
Kenneth Rose is an independent consultant and a senior fellow with the Institute of Public Utilities at Michigan State University. The views expressed here are his own.
Now that fuel prices have fallen recently from the highs seen in 2008 and wholesale electricity prices also have decreased, it might be tempting to attribute the lower prices to the restructuring of the wholesale electricity markets. Unfortunately, it’s a little more complicated than that.
To say fuel prices have been volatile in recent years would be a gross understatement. Natural gas prices in this decade have seen average monthly wellhead prices as low as $2.2 per thousand cubic feet (Mcf) in early 2002 to a high of $10.8/Mcf in June 2008. Then prices dropped again last fall to just below $3/Mcf in September 2009.1 At this writing in early December 2009, futures prices again are well north of $4/Mcf. Coal prices too have been volatile, particularly northern and central Appala-chia coal spot prices that more than tripled to above $140 a short ton, before dropping back to the pre-2008 levels in late 2009. Other coal prices also saw significant price increases on a percentage basis in 2008, followed by declines in 2009.