On May 19, 2011, FERC staff presented the Summer 2011 Energy Market and Reliability Assessment (the “Assessment”).   Overall, staff revealed that demand forecasts are largely the same as compared with Summer 2010, and generation and reserve margins for the season are projected to be sufficient. Staff also predicted drought conditions in Texas and the Southwest, but FERC did not anticipate that this would affect power generation.

As indicated in the staff presentation, the North American Electric Reliability Corporation (“NERC”) forecasts that total U.S. load, adjusted for weather, will increase by less than one percent from 2010, while capacity will rise by three percent.  In the Assessment, FERC staff reported that forecasted reserve margins are: 14 percent in Electric Reliability Council Of Texas, 24 percent in Western Electricity Coordinating Council, 33 percent in Florida Reliability Coordinating Council; 25 percent in Mid Continent Area Power Pool; 21 percent in Midwest Independent System Operator Inc. (“MISO”); 19 percent in Northeast Power Coordinating Council, 26 percent in PJM, 21 percent in Southwest Power Pool, and 29 percent for the areas of SERC Reliability Council that are not part of the MISO or PJM RTOs.  NERC forecasted that the reserves will be adequate.  The projected nameplate wind capacity will increase by around 2.6 GW from 2010 levels, according to the NERC Summer Assessment. 

In the Assessment, staff indicated that there is movement in forward electric prices that differ by region, while gas price movements were more uniform.  Staff also stated that hydropower production will lower electric prices in the West.  The Assessment indicated that Eastern forward power prices are up by 10-18% from Summer 2010 levels, while prices in the West are down due to a large amount of hydro generation.   Additionally, natural gas forward prices are 40-70 cents higher for this summer than a year ago, due to a combination of demand and storage levels 8 percent lower than Summer 2010.

The Assessment also tracked several market and infrastructure changes that might impact energy markets in Summer 2011, including: (1) the Trans Allegheny Interstate Line; (2) Florida Gas Transmission’s 483-mile expansion adding gas capacity in the state; (3) El Paso’s Ruby Pipeline; (4) Integration of FirstEnergy into PJM on June 1, which will alter the border between MISO and PJM.  Staff will continue to monitor these changes.

A copy of the Assessment is available here.