Allegheny Pennsylvania Pwr Averages $72.80/MWh In 1st Auction
17 Aprile 2009 - 9:48PM
Dow Jones News
Electricity prices averaged $72.80 a megawatt-hour in Allegheny
Energy Inc.'s (AYE) first auction to buy power for its utility
customers in Pennsylvania.
The power company, based in Greensburg, Pa., is required to
supply customers once rate caps expire at the end of next year in
its service territory, which includes the Pittsburgh suburbs.
The move in Pennsylvania away from rate caps could boost
earnings for Allegheny's generation business and other power
producers as they move from long-term contracts to market prices.
The auction results provide a first look at prices that Allegheny's
utility business will pass through to ratepayers once the caps are
lifted Jan. 1, 2011.
The auction, however, comes amid a sharp drop in wholesale power
prices since last summer. The slide has been driven by slumping
demand and a deep dip in natural gas futures, which are trading at
6 1/2-year lows. Allegheny moved up the date of its the first
auction from June to take advantage of the current market
prices.
The average price in Allegheny's auction came in below analysts'
expectations. Credit Suisse in a recent report forecast an average
price of around $74 a megawatt hour, while Deutsche Bank estimated
a price of $77 a megawatt hour.
Allegheny is one of several utilities buying power ahead of the
expiration of rate caps. The default service is for consumers who
don't sign up with a retail energy provider. PPL Corp. (PPL) and
Exelon Corp.'s (EXC) Philadelphia utility PECO are going through
similar processes.
Prices in the auction are for full requirement service, which
includes a variety of factors beside energy such as variations in
customer demand. Allegheny is scheduled to hold seven additional
auctions over the next three years.
If the average retail power price of the remaining auctions are
also $72.80/MWh, a typical Pennsylvania residential customer's bill
will increase by about $7.75, or 8.5%, over 2010 levels.
Shares of Allegheny Energy were recently down 46 cents, or 1.7%,
at $26.65 apiece.
-By Mark Peters, Dow Jones Newswires; 201-938-4604;
mark.peters@dowjones.com
(Christine Buurma contributed to this article.)