Electricity Suppliers & Wholesale Energy Prices
The third annual Northwest Wholesale Energy Market Conference, held in Portland during May, offered participants (myself among them) a chance to learn more about wholesale energy markets. Key background: Natural gas and electricity are both traded in wholesale energy markets, which consist of energy-producing infrastructure, consumer-serving facilities, and other participants who deliver and generate energy to customers. To be part of the dialogue at the conference, you had to be an active participant in the energy markets – in the retail sector, wholesale to business, wholesale to service, and wholesale to government customers. You also needed to be available for phone conversations with key participants.
While participating at the conference
you heard from several industry leaders and some of the most prominent wholesale energy marketers in the country and other countries. You heard from industry reps, from utility companies and grid operators, from electricians and HVAC technicians, from environmental groups, and wholesale power brokers. The conversations I participated in brought to light some important issues related to wholesale energy markets and how those markets can be affected to the detriment of consumers – particularly in today’s economy when wholesale electricity is used in everything from electronic devices to industrial cooling systems, as well as in furnaces used by thousands of commercial and residential customers.
Some wholesale marketers
described wholesale energy markets as “one of the largest and most lucrative markets in the U.S.” Energy wholesalers and marketers say wholesale electricity, natural gas, and wholesale petroleum “hold the key” to the success of today’s economy and are indispensable to today’s global economy. Other energy marketers emphasized that wholesale power plays a large role in rural economies, as well as in helping to mitigate greenhouse gas emissions. Still, others talked about the need for more affordable, reliable, sustainable sources of energy and called for the development of new clean energy technologies.
The wholesale energy market is a huge “demand factory,”
as one agent put it, which is “almost like a store where everybody buys everything” from tires to cars to chemicals. The wholesale energy prices of one report suggested that wholesale prices have reached their highest in over twenty years. With oil and gas prices on the rise in wholesale electricity prices are expected to follow suit and may even exceed current retail prices. Many wholesale marketers said that they expect wholesale electricity prices to continue to increase between now and the end of next year, with gas prices also increasing, but still far below current retail levels. One agent told me that wholesale prices could reach upwards of three hundred dollars a therm because of increasing demand and falling coal and natural gas prices.
The wholesale electric power exchange market
or wholesale energy market is just one part of the EPC, or electrical power distribution market. This is a system that brings together a massive array of different electric power suppliers, electricians, loaders, generators, and other wholesale electricity distributors. A wholesale energy market is made up of some independent system operators or” PJM.”
A PJM is a market maker
that sells power back to wholesale energy suppliers. The PJM in turn agrees to buy large volumes of demand generated by the suppliers and pass those costs on to the customers. This increases the level of competition among energy suppliers leading to better pricing and availability of energy to the end consumer. In essence, this means increased competition and the ability for consumers to obtain energy at a lower cost than they would be able to obtain it if the market were free for all buyers and sellers.