|NRG ENERGY, INC. filed this Form 10-K on 03/01/2018|
Natural gas prices are a primary driver of coal demand. The low priced commodity environment has stressed coal equities, leading coal suppliers to file for bankruptcy protection, launch debt exchanges, rationalize assets, and cut production. If multiple parties withdraw from the market, liquidity could be challenged in the short term. Inventory overhang will be utilized to offset production losses. Coal prices are typically affected by the price of natural gas.
Electricity Prices — The price of electricity is a key determinant of the profitability of the Company. Many variables such as the price of different fuels, weather, load growth and unit availability all coalesce to impact the final price for electricity and the Company's profitability. The following table summarizes average on-peak power prices for each of the major markets in which NRG operates for the years ended December 31, 2017, 2016, and 2015. For the year ended December 31, 2017 as compared to the same period in 2016, the average on-peak power prices increased primarily due to the increase in natural gas prices. For the year ended December 31, 2016 as compared to the same period in 2015 the average on-peak power prices decreased primarily due to the decrease in natural gas prices.
(a) Gulf Coast region also transacts in PJM - West Hub.
(b) Average on-peak power prices based on real time settlement prices as published by the respective ISOs.
(c) Average on-peak power prices based on day ahead settlement prices as published by the respective ISOs.
The following table summarizes average realized power prices for each region in which NRG operates for the years ended December 31, 2017, 2016, and 2015, which reflects the impact of settled hedges.
Though the average on peak power prices have increased on average by 9% for the year ended December 31, 2017 as compared to the same period in 2016, and decreased on average by 15% for the year ended December 31, 2016 as compared to the same period in 2015, average realized prices by region for the Company were driven by the Company's multi-year hedging program and the success of the Company's commercial operations team in optimizing the value of the Company's assets on a daily basis.