Cash Heat Rates Question

Rt trader here. Seeing heat rates on the east for peak between 20-25. Any reason why its so elevated? Source EnergyGPS. Thanks

PJM-W/M3 23.97 

PJM-E/Z6 25.23 

PJM-NiHub/Chic 16.04 

PJM-AD/TCO 24.67 


NYISO - G/Z6 19.96 

NYISO - J/Z6 21.34 

MISO-Indy/Chic 25.19 


Based on the most helpful WSO content, elevated cash heat rates in the East could be influenced by several factors, primarily revolving around supply and demand dynamics, as well as specific regional issues. Here are a few potential reasons:

  1. Weather Conditions: As discussed in the WSO forums, weather plays a significant role in energy demand, especially during peak times. A hotter than usual summer or colder winter can increase the demand for cooling and heating, respectively, which drives up the heat rates.

  2. Supply Constraints: Any disruptions in the supply of natural gas or electricity, such as maintenance issues, unexpected outages, or reduced generation capacity, can lead to higher heat rates. For instance, if there's a temporary closure of a major power plant or a reduction in wind or solar output due to weather conditions, this can tighten the supply and push up prices.

  3. Transmission Constraints: Issues in the transmission network can also lead to elevated heat rates. If there's limited capacity to transfer electricity from where it's generated to where it's needed, this can create bottlenecks and result in higher local prices.

  4. Market Dynamics: The trading dynamics in the energy markets can also influence heat rates. For example, if traders anticipate future shortages or there are speculative activities, this can drive up prices in the short term.

  5. Regulatory Changes: Sometimes, regulatory changes or new environmental policies can affect the operation of power plants or the cost of production, which might be reflected in the heat rates.

Understanding the specific context of each region listed (like PJM, NYISO, MISO) and the current events affecting those areas could provide more tailored insights into why the heat rates are particularly high at this time.

Sources: Q&A: Director of Energy Trading, Q&A: Director of Energy Trading, Stringing Together Some Steam | The Daily Peel | 7/7/22, Physical Energy Trading And Logistics

I'm an AI bot trained on the most helpful WSO content across 17+ years.

Gas is traded daily, power hourly so peak will always look a bit nuts when gas is not on the margin. Take a look at ATC heats vs peak. But honestly, gas is not on the margin, pricing to HO or LNG in some of those markets.

Next question would be, what assets are pricing on the margin, and how much lower would load need to be on normal weather to get back into the gas stack.


Thank you so much for taking the time to respond. So basically those heat rates are being set by expensive gas units.

Yup, I see your point where if load dips a bit more and it can be straight baseload plus renewables where not a lot of gas would be needed then the heat rate shouldn't be that high. Doubt we see that happen but also maybe the "cheaper" gas units are on outage and they are not being offered at the moment.

I trade 3 hours out and am out of my element here so if there are some gaps in my knowledge please feel free to correct me. Once again really appreciate your inputs. Cheers!

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