2009 State of the Market Report
to the load-weighted average real-time energy price plus capacity costs, ancillary service costs, and average real-time uplift costs per megawatt (“MW”) of real-time load.2
Figure E-1: All-In Price of Electricity 2007 – 2009
All-In Price ($/MWh)
Capacity Uplift Ancillary services Energy Gas Price
Natural Gas Price ($/MMBtu)
070809 J F MAM J J A S O N D J F MAM J J A S O N D J F MAM J J A S O N D
The all-in price was $31.28 per megawatt-hour (“MWh”) in 2009, a 40-percent decrease from 2008. The figure shows that price fluctuations are generally driven by changes in fuel prices as one would expect in a well-functioning market. This relationship exists because fuel costs represent the majority of most suppliers’ marginal costs of production. Since suppliers in a competitive market have the incentive to offer their supply at marginal cost, changes in fuel prices directly translate into changes in offer prices when the market performs competitively.
Figure E-1 also shows that the price of energy was lower in nearly every month in 2009 than in any month during the preceding two years. Uplift and ancillary services costs continue to be a small share of the all-in price (less than one percent). The VCA was introduced in June 2009.
Uplift costs are primarily comprised of real-time Revenue Sufficiency Guarantee Make Whole Payments (“RSG”).