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2009 State of the Market Report

Prices and Revenues

throughout the first quarter of 2009 and then remained relatively stable for the rest of the year. Both Illinois Basin coal prices and Powder River Basin coal prices fell roughly 30 percent on average in 2009 from 2008.

The impact of fluctuations in marginal fuel prices can obscure the underlying electricity market performance. Hence, we calculate a fuel price-adjusted SMP, shown in Figure 4 below. This measure highlights variations in electricity prices that are due to factors other than fluctuations in fuel prices, such as changes in load or congestion costs. To calculate this metric, each interval’s SMP was indexed to the average two-year fuel price of the marginal fuel during the interval. The price-setting fuel for each interval was assumed to be the fuel that was most frequently on the margin during the particular interval (more than one fuel can be on the margin in a single interval). This metric does not account for changes in commitment or dispatch that may occur under different levels of fuel prices.

Figure 4: Fuel-Price Adjusted System Marginal Price 2008 – 2009

$80

System Marginal Price ($/MWh)

$70

$60

$50

$40

$30

$20

Average Fuel-Adjusted SMP Average SMP

$10

$0

08 09 J

FMAM J J A S OND J

FMAMJ J

A S OND

2008

2009

Average fuel-adjusted energy prices fell almost 15 percent in 2009. This reduction was primarily due to milder than normal temperatures, reduced economic demand, and the effects of

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