Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Neel Mitra – Simmons International.
Neel Mitra – Simmons International
Could you give any color on much the capacity payments are moving relative to rest of pool capacity payments? Is there any linkage since it seems that MISO capacity payments are set for a shorter term? It also seems like the guidance for the MISO coal capacity payments at your plants came down from the start of the year.
Mark Jacobs
Let me give you a little color on that. MISO as you know does not have a forward traded capacity market that capacity payments are done in a bi-lateral fashion. In general, we have seen very modest capacity value in the MISO fleet so I really don't see as I said; there's not been a big value driver for us.
One of the things I might point here that could be of interest going forward is First Energy had filed on Friday to move into PJM for MISO, and that's something that will take FERC approval, they've indicated a desire to do that by 2011.
Based off of our quick read of that situation, if that were to occur, we would likely have three of our plants, Avon Lake, Newcastle and Niles that would move from MISO into PJM, and that would probably provide us some benefit given the forward traded capacity market in PJM.
Neel Mitra – Simmons International
On Page 16 of your presentation, the PJM weighted average plant to west hub bases has come down significantly for 2009, 2010 versus past years. Is this due to less congestion, lower demand or do you see any longer term structural changes in that basis?
Mark Jacobs
I don't really see any structural changes in the bases. What you're really seeing there is the impact of gas prices and there's a number of plants on the eastern side of the constraint that get into the west hub average pricing, so when you see higher gas prices, generally you see higher bases differentials from our fleet into PJM web hub.
So again, what you're really seeing there in the results and in the outlook going forward is just the effective lower gas prices.
Operator
Your next question comes from Lason Johong – RBC Capital Markets.
Lason Johong – RBC Capital Markets
Out of curiosity, any chance you want to increase your 2010 hedging levels in case the forward market is wrong and natural gas prices collapse?
- To read the full transcript on Seeking Alpha, click here »
