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Abstract:
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Competitive electricity markets have been around less than two decades, constantly expanding and changing operating procedures. There is limited research on how wholesale market electricity prices affect retail electricity prices in relation to other variables. This study analyzed the determinants of retail prices by customer class in PJM, a mid-Atlantic electricity market region. The results will help the U.S. Energy Information Administration and others to better understand and model electricity prices in both long and short-term modeling systems. Annual data was analyzed using log-linear regression analysis. Influences on non-stationary monthly prices were studied using an autoregressive distributed lag, co-integration method. Our research found that state regulatory structure has the greatest influence on which variables most impact retail prices. In PJM states where all electricity supply must be acquired competitively, retail prices are highly correlated with PJM market prices, less so in competitive states without this rule, and very little in regulated states. Electricity price forecasts will be more accurate using algorithms that account for varying regulatory structures.
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