The US Northeast and eastern Canada received a severe pounding by winter storm Nemo this past week. The extreme blizzard dumped multiple feet of snow across many areas including New York.
The storm continued the trend of high energy prices in New York since the holiday season (see figure 1). While electricity prices didn’t reach their peak from late January, they did remain higher than late 2012. Weather is the major driver of both electricity and natural gas prices on the east coast as can be seen by the strong correlation in figure 1.
Weather’s impact on electricity and natural gas prices is correlated strongly with demand. With extreme temperatures, particularly in the winter, demand for electricity increases to meet the heating requirements of the region. This is a driver of natural gas prices because natural gas makes up a large portion of the generation capacity in the northeast.