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Spot power, gas prices hit multi-year highs in several

regions

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Power demand in PJM grid could reach record high for

winter

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Power and gas prices spike due to gas pipeline constraints

By Scott DiSavino

Jan 21 (Reuters) - U.S. spot natural gas and power

prices soared to multi-year highs in several parts of the

country with extreme cold expected to boost gas demand to a

daily record high on Tuesday.

Extreme weather has created havoc for power and gas markets

in recent years as demand has come close to outpacing supply.

In February 2021, a freeze in Texas killed more than 200

people and left millions without power, water and heat for days

after extreme cold caused gas supplies to drop by freezing oil

and gas infrastructure, known as freeze-offs.

The nation's biggest power grid, PJM Interconnection, which

oversees all or parts of 13 states from Illinois to New Jersey,

extended its Jan. 20-22 cold weather alert through Jan. 23, and

said power demand could hit a new winter peak from Jan. 20-22.

Gas provides about 43% of the nation's power generation and

heats about 45% of the country's homes, according to data from

the U.S. Energy Information Administration (EIA). The expected

jump in demand, coupled with a potential drop in supplies, could

drive up power and gas prices next week.

In the spot market, gas prices rose to their highest since

January 2024 at several U.S. hubs, including the U.S. Henry Hub

benchmark in Louisiana, Waha in

West Texas, Eastern Gas South in Pennsylvania,

the Southern California Border , PG&E

in Northern California and Chicago

.

In the Northeast meanwhile, gas prices soared to $43 per

million British thermal units in New York, their highest since

hitting an all-time high in January 2018, and climbed to $24 at

the Algonquin hub in New England, their highest

since February 2023.

Soaring spot gas prices boosted next-day power prices to a

record high of $275 per megawatt hour at the PJM West Hub

in western Pennsylvania and a 30-month high of

$268 in New England .

That compares with averages in 2024 of $1.98 per mmBtu for

gas in New York, $2.88 for gas in New England, $42 per MWh for

power at PJM West and $47 for power in New England.

It is common for power and gas prices to spike in New

England in the winter.

New England power generators often switch from relatively

cheap pipeline gas to more expensive oil and gas from liquefied

natural gas imports because gas pipelines into the six-state

region cannot carry enough supply to heat the region's homes and

businesses and fuel its power plants on the coldest winter days.

BY THE NUMBERS

Financial firm LSEG said average gas output in the Lower 48

U.S. states has fallen from 104.2 billion cubic feet per day in

December to 103.0 bcfd so far in January, due mostly to freezing

oil and gas wells and pipes.

On a daily basis, freeze-offs have helped cause output to

slide by around 3.3 bcfd over the past six days to a preliminary

three-month low of 100.4 bcfd on Tuesday.

While curtailments were small so far this winter, analysts

and traders warned that freeze-offs could rise with more cold

still to come this week.

Freeze-offs in past winters cut gas output by roughly 8.1

bcfd from Jan. 9-16 in 2024, 4.6 bcfd from Jan. 31-Feb. 1 in

2023, 15.8 bcfd from Dec. 20-24 in 2022, and 20.4 bcfd from Feb.

8-17 in 2021, according to LSEG data.

LSEG said total gas use so far this winter peaked at 168.2

bcfd on Jan. 20 and could reach 172.2 bcfd on Jan. 21. If

correct, demand on Jan. 21 would top the current daily record

high of 168.4 bcfd on Jan. 16, 2024.

One billion cubic feet of gas could supply about five

million U.S. homes for a day.