Commodity Prices

How fuel prices feed generator bids

Commodity price inputs set the marginal fuel costs that drive thermal bid curves and, in turn, locational marginal prices. Each unit’s bid reflects its heat rate applied to delivered fuel price plus any carbon cost, with tax credits where applicable.

Natural gas

Natural gas is priced in two stages. A single Henry Hub signal, shared across all of Modo Energy’s US regions, sets the benchmark. A locational delivery premium then converts that benchmark into a delivered price for each part of the footprint.

Both legs of the Henry Hub signal price the same thing, the hub itself, so the curve does not change meaning across the blend:

• The monthly shape comes from the quoted CME Henry Hub futures strip, taken from the latest traded settlement snapshot by delivery month. The shape is the normalized median monthly ratio across the strip’s complete delivery years.
• The long-run annual level comes from the EIA Annual Energy Outlook reference case (2026 vintage), with the futures-derived monthly shape applied on top.
• The two legs blend by a fade, not a handover. The futures weight falls linearly across the quoted strip. The first quoted delivery month is priced entirely from futures and the last entirely from the outlook, with every month between them a weighted blend of the two. Beyond the strip the curve is the outlook alone. Because the weight moves month by month rather than switching at a fixed horizon, the curve carries no step.

Locational delivery premiums are then applied by gas hub. Five regional hubs are used, each mapped to the zones it supplies:

The delivery premiums are calibrated to historical delivered gas costs from EIA-923, and stored as a monthly premium per hub. Because the blended curve is Henry Hub at every month, the whole premium applies at every month of the horizon.

Coal

The SPP fleet burns predominantly Powder River Basin coal. Each coal plant is anchored to its own realized delivered cost from recent EIA-923 receipts, in real 2024 dollars, and held roughly flat in real terms over the forecast. The regional EIA Annual Energy Outlook trend can shade the level down but not up, and a delivered-price floor guards against unrealistically low values in later years. Because the anchor is plant-specific, delivered coal cost is not uniform across the footprint: plants nearer the Powder River Basin burn materially cheaper coal than those further south.

Other fuels

Default delivered prices are used for fuels without reported market data, including nuclear fuel, biomass, and byproduct gases.

Carbon

No carbon price applies in the SPP footprint: there is no regional cap-and-trade program and no state carbon price, so the carbon cost component of each unit’s bid is zero.

Data sources