NYISO LMP Merchant Curve: New York Power Price Forecasts

Zone J (New York City) and Zone K (Long Island) are physically separated from upstate generation by a set of binding transmission constraints, most notably the Central-East interface and the Con Edison import capability limit. When demand in the five boroughs or Long Island exceeds what can be imported from upstate, the ISO dispatches in-city and in-zone generation at higher marginal cost, setting the locational marginal price at elevated levels. The in-city generation fleet skews toward older gas-fired peakers with higher heat rates and fuel costs, structurally anchoring the Zone J and Zone K price floor above upstate zones during most hours. Long Island also operates as a physically constrained island with limited cross-sound cable capacity, further isolating it from mainland supply. This structural separation persists even as offshore wind procurement accelerates under the CLCPA, since new offshore wind connections into Zone J and K will relieve some but not all of the supply constraint. See our analysis of New York’s Power Pricing Paradox for deeper context on this structural premium.

New York has contracted over 9 GW of offshore wind capacity under the CLCPA framework, with projects targeting delivery into Zones J and K from approximately 2027 onward. The primary effect on forward power prices will be suppression of on-peak afternoon prices in Zone J and Zone K during summer months, when offshore wind generation coincides with high cooling load. The shape of the diurnal price curve will shift, compressing the peak-to-off-peak spread and reducing scarcity pricing frequency in the load pocket. However, offshore wind does not eliminate the structural transmission constraint: during low-wind periods, the same bottleneck dynamics that currently drive the Zone J premium will persist. Longer-dated forecasts need to account for the offshore wind build timeline risk, including permitting delays, interconnection queue management, and offshore supply chain constraints that have already pushed several contracted projects off their original timelines. Noreva’s scenarios model a range of delivery profiles to capture this uncertainty in project finance and PPA structuring contexts.

NYISO operates a hybrid pricing structure. The day-ahead and real-time markets settle at the nodal level for generators, meaning each generator interconnection point has its own locational marginal price composed of the energy, congestion, and loss components. Load, however, settles at the zonal level, with each of the 11 zones assigned a zone-average LMP that reflects the load-weighted average of nodal prices within that zone. For most merchant curve applications in project finance, PPA structuring, and asset valuation, the zonal price is the relevant settlement reference: an offshore wind project delivering into Zone J will receive the Zone J zonal price for its energy settlement under the standard interconnection construct. Nodal prices matter primarily for generators with strong locational signals at specific substations or interconnection points that deviate from the zone average. Noreva’s forward curves are produced at the zonal level by default, with nodal overlays available for specific interconnection points upon request.

New York and New England share constrained interstate natural gas pipeline infrastructure, particularly on the Iroquois and Tennessee Gas Pipeline systems. During cold snaps when residential and commercial heating demand competes with gas-fired power generation for pipeline capacity, fuel prices at the Transco Zone 6 and Iroquois Zone 2 city-gates can spike dramatically above the Henry Hub reference price. Gas-fired generators facing elevated spot fuel costs pass this through in their offer prices, setting NYISO real-time LMP at elevated levels in the eastern and downstate zones during these events. For forward curve purposes, Noreva’s winter scenarios model the historical distribution of cold-snap frequency and severity, pipeline constraint probability, and dual-fuel capability in the downstate fleet, translating these into a probabilistic range of winter price outcomes rather than a single deterministic path. This approach is particularly relevant for peaker asset valuation and winter risk hedging in New York. See also our broader analysis on NYISO transmission constraints and price formation.