A comparison of petroleum futures versus spot prices as predictors of prices in the future

Even though studies have indicated that the futures market leads the spot market in price discovery, this paper hypothesizes that the ‘predictive’ significance of each should be the same. A number of different statistical tests are presented to test this hypothesis. When deseasonalized data is employed the predictive significance of each series is found to be the same, but when actual prices are employed, futures prices did correctly anticipate the observed seasonal pattern.     

Time-varying risk premiums in petroleum futures prices

This paper uses an ARMAX-ARCH model to estimate the conditional expected returns of petroleum futures prices under time-varying risk. Empirical results suggest that macroeconomic risk factors have significant forecast power in petroleum futures markets. The conditional expected returns for petroleum futures prices are quite large. Results from a small forecasting experiment indicate that the out-of-sample forecasts from an ARMAX-ARCH model generally outperform a random walk for all forecast horizons. Regression-based tests for market timing indicate that the model captures both the correct sign and the correct magnitude. Net trading profits are positive in all cases.     

Trends in prices to commercial energy consumers in the competitive Texas electricity market

To date, the price of electricity to commercial or business energy consumers has generally increased at greater rates in the areas of Texas where retail competition has been introduced than in areas that do not enjoy competition. Trends in commercial competitive prices have largely mirrored trends in residential prices. Market restructuring has tended to increase the sensitivity of retail electricity prices to changes in the price of natural gas, the marginal fuel used for generation in Texas. Consequently, the rapid increases in the commodity price of natural gas following restructuring led to increases in competitive electric rates which exceeded the increases in areas not exposed to restructuring, where the fuel component of electric rates tend to reflect a weighted average of the utilities’ fuel costs. There is some evidence that pricing behavior by competitive retailers changed when the retailers affiliated with the incumbent utilities were permitted some pricing flexibility, resulting in a reduction in prices.     

Has electric utility restructuring led to lower electricity prices for residential consumers in Texas?

This paper analyzes the determination of residential electricity prices in the competitive Electric Reliability Council of Texas (ERCOT) market. This analysis suggests that electricity restructuring in Texas has not yet resulted in lower prices for the majority of residential energy consumers in areas open to competition. Contrary to common expectations, residential electricity costs for consumers at a typical (1000 kWh per month) consumption level have increased at a greater rate in the areas of Texas offering retail choice than in the areas of the State where retail competition has not been introduced.     

Characteristics of the prices of operating reserves and regulation services in competitive electricity markets

In this paper, characteristics of the prices of reserves and regulation services in the Ontario, New York and ERCOT electricity markets are studied. More specifically, price variability, price jumps, long-range correlation, and non-linearity of the prices are analyzed using the available measures in the literature. For the Ontario electricity market, the prices of 10-min spinning, 10-min non-spinning, and 30-min operating reserves for the period May 1, 2002 to December 31, 2007 are analyzed. For the New York market, prices of the same reserves plus regulation service are studied for the period February 5, 2005 to December 31, 2008. For the ERCOT market, we analyze the prices of responsive reserve, regulation up and regulation down services, for the period January 1, 2005 to December 31, 2009. The studied characteristics of operating reserve and regulation prices are also compared with those of energy prices. The findings of this paper show that the studied reserve and regulation prices feature extreme volatility, more frequent jumps and spikes, different peak price occurrence time, and lower predictability, compared to the energy prices.     

Effects of regulatory reforms in the electricity supply industry on electricity prices in developing countries

Electric power sector reforms in the electricity supply industry have had an impact on industrial and household prices in developing countries in Latin America, the former Soviet Union, and Eastern Europe. Using original panel data for 83 countries during the period from 1985 to 2002, we examine how each policy instrument of the reform measures influenced electricity prices for countries in the above regions. We found that variables such as entry of independent power producers (IPP), unbundling of generation and transmission, establishment of a regulatory agency, and the introduction of a wholesale spot market have had a variety of impacts on electricity prices, some of which were not always consistent with expected results. The research findings suggest that neither unbundling nor introduction of a wholesale pool market on their own necessarily reduces the electric power price. In fact, contrary to expectations, there was a tendency for the price to rise. However, coexistent with an independent regulator, unbundling may work to reduce electricity prices. Privatization and the introduction of foreign IPP and retail competition lower electricity prices in some regions, but not all.     

Did the expiration of retail price caps affect prices in the restructured Texas electricity market?

On January 1, 2007, the Electric Reliability Council of Texas (ERCOT) market became the first restructured market in the US to completely remove caps on the prices which could be charged to residential energy consumers by the retailers associated with the traditional or incumbent utility service providers. Our analysis suggests that the expiration of the price-to-beat (PTB) price caps may have led to a reduction in the average prices charged by competitive retail electric providers (REPs).     

Carbon prices,institutions, technology and electricity generation firms in two Australian states

A relationship exists for the liberalised Australian electricity supply industry between institutional structures and technological change. The traditional institutional framework has been based on centralised generation and a regulated vertically integrated monopoly structure. This paper investigates the issues of institutional and technological change using the social cost perspective (including externalities), and focuses on the imperatives of greenhouse gas emission reductions.     

Statistical analysis of negative prices in European balancing markets

The presence of renewable power generation technologies increases the need for system flexibility due to their variable nature. The increasing share of variable renewables in European power systems create a downward adequacy problem, which deals with the ability of power systems to cope with periods of excess generation. The occurrence of negative prices on Central Western European electricity markets confirms the relevance of this issue, which is referred to as “incompressibility of power systems” and is assessed as a barrier for further renewable power integration. The objective of this article is to identify the main drivers of negative price periods in European balancing markets, by means of both an empirical and regression analysis. Results confirm a positive relation with the scheduled generation of renewables and inflexible base load, as well as a negative relation with the scheduled system load. Furthermore, the occurrence of negative prices is related to the positive and negative forecast error of renewable generation and demand, respectively. It is concluded that negative balancing market prices provide a market signal for investments in flexibility sources such as flexible generation, demand response, electricity storage, and interconnector capacity.