Summer is here and all energy market participants in Texas – end-users, generators, traders and suppliers – are nervous about the market. Will this summer be a boom or a bust when it comes to Texas energy prices? This affects customers that have not hedged this summer and are on an index product. It also affects customers looking to fix a term contract, which are impacted by near-term price trends.
Last year, the forward markets traded much higher in anticipation of a repeat of 2011, when prices skyrocketed to an all-time high. But it quickly became apparent that 2012 was going to be a bust and prices were low and lacked volatility. That was good news for customers that had not fixed their rate, but not for those that had bought power who regretted their decision. One thing is certain: the volatility of the Texas market is all built into the summer months, primarily July and August. Around the clock (ATC) wholesale energy prices for most months trade in the $30/ to $40/MWh range while the summer months trade in the $70/ to $80/MWh range. This premium is due to the risk of day-ahead (DAM) and real-time prices (RTSPP) spiking to the offer cap due to extreme heat.
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