Two Electricity Contracts in the Future
The Commodity Futures Trading Commission (CFTC) last week
approved a New York Mercantile Exchange (NYMEX) application to
trade electricity futures and options based on delivery at the
Pennsylvania-New Jersey-Maryland (PJM) western hub. And slated for
approval today is the proposed and competing Chicago Board of Trade
(CBOT) PJM western hub electricity futures contract.
The NYMEX and CBOT applied to offer the contracts in November.
NYMEX said its contract is a complement to its other two sets of
eastern electricity futures and options - one based on delivery
into the Cinergy transmission system and the other based on
delivery into the Entergy transmission system - which have been
averaging a combined volume of close to 1,000 contracts a day.
NYMEX President R. Patrick Thompson said, "We are looking
forward to introducing these contracts in the next few months and
expect to announce a launch date shortly." Terms and conditions of
the NYMEX contract will parallel those in the other eastern
electricity contracts, including delivery rate, contract unit, and
delivery period. Prices and fluctuations prices will be quoted in
dollars and cents per MWh. The minimum price fluctuation will be
$.01 per MWh. The maximum daily price fluctuation will be $6.00 per
MWh above or below the preceding day's settlement price (the basic
maximum fluctuation). Expanded limits will apply when the contract
settles at the maximum limit.
The CBOT PJM contract is to be traded along with the CBOT's TVA
and ComEd contracts, creating a power complex to provide risk
management to the southeastern, midwestern and northeastern United
States, CBOT said. Terms of the NYMEX and CBOT contracts are nearly
identical except CBOT's trading unit is more than double NYMEX's at
1,680 MWh per contract.
Joe Fisher, Houston
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