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How Should Customers Respond to The Winter 2014 Electricity Price Spikes?

October 8, 2014

Ron AberizkSr. Sales Manager,

Direct – Upstate NY

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Polar Vortex = Strong Demand• Persistent, large-scale cyclone

(intense area of low pressure) located near both poles.

• Stronger in the winter.• Associated with extreme cold, but

typically reside near/within the Arctic/Antarctic.

Jan 2014• GWHDDs = 1048• GWHDD 10YA = 931• 15th coldest since

1950

Feb 2014• GWHDDs = 883• GWHDD 10YA = 796• 8th coldest since

1950

Impact on energy markets:• New York spot price spiked for natural

gas and electricity• NYMEX spot natural gas increased to

5-year highs (One month forward)

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Jan14 NYISO Gas/Power Prices Increased West to East

Western zones hadlower gas/power prices

due to lower consumption and less gas constraints

Western Zones have more coal/hydro than east

Eastern zones had

Higher gas/power pricesdue to higher consumption

and gas constraints

Zone F can deliver powerto ISO-NE

Zone F & ISO-NE prices highly correlated

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Daily NYISO Average Costs/MWh

2014 LBMP Average Cost/ MWH

2013 LBMP Average Cost/ MWH

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NYISO Zone A vs. Dominion South Port

$3.00

$4.00

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$10.00

$0

$50

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NY Zone A DA Dom South Pt + .40

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NYISO Zone G vs. Tennessee Zone 6

$0

$10

$20

$30

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$50

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$70

$80

$90

$0

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NY Zone G DA Tenn Zone 6

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NYISO Regional Issues• NYISO set new peak records

o New, all-time record peak set July 9, 2013 - 33,956 MWo New winter peak reached in January 7, 2014 - 25,738 MW

• Peak demand expected to outgrow electrical usageover next 10 years

o Peak demand projected to grow at average annual rate of 0.83%o Overall usage forecast to grow at average annual rate of 0.16%

• Power plant retirements outpaced additionso Resource margins remain positive, however . . .

o Surplus went from 5,000 MWs in 2012 to 1,900 MWs in 2014

• New York moving to diversify generation, but gas rules!o 2013 - 46% electric generation fueled by duel fuel (gas&oil)

o More than 70% of proposed power projects would be fueled by gas

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NYISO Reliability Concerns Reflected in Capacity Prices

NYISO

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NYISO Generation Addition and Removal

Selkirk Units 1&2 notice of mothballing withdrawn 9/14

+ 348MW

Danskammer back to service

+ 494MW

Total 842MW

527MW Deficiency

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WEATHER OUTLOOK – THIS OR ?

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NWS Dec-Feb ABOVE Normal Temps Northern U.S.

NOAA; NWS

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Farmer’s Almanac- Winter 2014-2015

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RESPONSE

• Know your objectives and risk tolerances/ Quick Reactions

• Gas pipeline situation unchanged from last winter

• Upside risk greater than downside

• Weather “risk” premiums may only diminish closer in

• Power – potential transmission/capacity increases

• Energy Budget Strategy should include:

– Ability to act quickly if gas/power price decline or increase

above budget targets

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QUESTIONS ?