9.2 Electricity Prices

Wholesale Electric Rates

MISO operates a market for the buying and selling of wholesale electricity. The price of energy for a given hour is referred to as the Locational Marginal Price (LMP). The LMP represents the cost incurred, expressed in dollars per megawatt hour, to supply the last incremental amount of energy at a specific point on the transmission grid.

The MISO LMP is made up of three components: the Marginal Energy Component (MEC), the Marginal Congestion Component (MCC) and the Marginal Loss Component (MLC). MISO uses these three components when calculating the LMP to capture not only the marginal cost of energy but also the limitations of the transmission system.

In a transmission system without restrictions, the LMP across the MISO footprint would be the same. In reality, the existence of transmission losses and transmission line limits result in adjustments to the cost of supplying the last incremental amount of energy. For any given hour, the MEC of the LMP is the same across the MISO footprint. However, the MLC and MCC differ to create the variance in the hourly LMPs.

The 24-hour average day-ahead LMP at the Indiana hub over a two-week period highlights the variation in the components which make the LMP. The time frame includes portions of the extreme weather events of 2015 (Figure 9.2-1). A real-time look at the MISO prices can be found on the LMP Contour Map[1] (Figure 9.2-2).

Figure 9.2-1: Average day-ahead LMP at the Indiana hub

Figure 9.2-1: Average day-ahead LMP at the Indiana hub

[1] Market Analysis Monthly Operations Report

Figure 9.2-2: LMP contour map

Figure 9.2-2: LMP contour map

2 https://www.misoenergy.org/LMPContourMap/MISO_All.html

Retail Electric Rates

The MISO-wide average retail rate, weighted by load in each state, for the residential, commercial and industrial sector, is 8.79 cents/kWh, about 15 percent lower than the national average of 10.3 cents/kWh. The average retail rate in cents per kWh varies by 3.1 cents/kWh per state in the MISO footprint (Figure 9.2-3).

Figure 9.2-3: Average retail price of electricity per state[2]

Figure 9.2-3: Average retail price of electricity per state[2]

 

3 May 2014 EIA Electric Power Monthly with Load Ratio Share data calculated from December 2013 MISO Attachment O data