Gas Prices are Near Ten Year Lows

The combination of many things, such as warm temperatures, high gas production, large storage and short positions by speculators—has reduced natural gas prices to near 10-year lows this week as we approach winter. The NYMEX November 2015 natural gas futures contract recently dropped to a low of $1.948/MMBtu, the lowest price on a  prompt month since April 2012.

This is only 4 cents above the 10-year low price of $1.902/MMBtu set on April 20, 2012 and illustrates a 22 percent decrease in gas prices in less than a week. Continued warm weather in the first half of November, combined with additional storage injections, could continue to push down NYMEX prices in the short term until colder weather increases heating demand.

Gas Price LowIf this has  you thinking about how to manage your energy costs for the next few years, you are on the right track.

Gas Storage at Record Highs

NYMEX fundamentals have been pushing prices lower.  Gas storage is at a record level due to warmer than normal temperatures in the Eastern half of the nation.  It is 12% above last year’s levels and 4% above the 5-year average.  NOAA is forecasting a continued warm winter.

Natural Gas Production is High

Production has remained high, despite dropping prices.

Wall Street Speculation

Bearish bets by banks and hedge funds have also had their impact on prices.  These bets could change at any time, though.  If weather becomes colder than expected, market prices could spike quickly.

How to Benefit from Present Prices

Understand that prices likely will not stay this way.  Consider taking advantage of the current market to reduce your price volatility for the coming years, for both electricity and natural gas.

  • Lock in prices for longer terms
  • For larger users, use hedge portions of your volume each month, similar to dollar cost averaging

Contact Better Cost Control to control your company’s energy costs.

Now is the time to contract Electricity and Gas

EMEX

Prices for electricity and natural gas are nearing record lows, making this a great time for customers to purchase their power ahead of time.

This is due to several factors, including a warmer-than-average weather outlook for spring, a surplus of natural gas supply and a pull-back in power prices.

Here’s what you need to know.

Warmer Weather Is Reducing Demand

For those living in the snow-covered regions of the Mid-Atlantic and Northeast, it seems hard to believe this winter has been relatively mild compared to last year and warmer-than-average temperatures are on the way. It’s true that last November was the coldest since 2000 and the eighth coldest nationally since 1950. However, this was followed by a warmer pattern in late November and early December. While certain regions have clearly had cold snaps throughout the winter, they haven’t been as widespread and long-lasting as the cold we experienced during last year’s Polar Vortex.

This means demand has fallen compared to last year, contributing to lower prices.

Now that the worst appears to be over and spring is just a few weeks away, the National Weather Service is forecasting a warm spring for the West, Mid-Atlantic and Northeast regions and a warmer-than-average summer along both coasts.

Natural Gas Surplus Keeps Prices Low

Withdrawals from natural gas storage continue to be well below what we experienced last year. In 11 of the last 13 weeks, natural gas withdrawals were smaller than last year. We saw a brief uptick in January, but recovering production and inconsistent demand for heating kept more natural gas in storage. Unless temperatures remain cold through March, we’re on pace to end the season with a surplus.

By contrast, last year’s heating season ended with a deficit in natural gas supply. The elimination of that deficit cut natural gas prices on the NYMEX almost in half. This historical correlation between the gas storage surplus and deficit and the NYMEX 12-month strip, as well as estimates of end-of-season storage, suggest prices could fall even lower this spring.

Gas Consumption Will Reach An All-Time High

With natural gas prices this low, we can expect power companies to use more natural gas and reduce their reliance on coal. We’ve seen an upward trend in natural gas consumption by power companies for the past decade, but now it’s on track to reach record levels, according to the Energy Information Administration.

Gas demand in the power sector is 6 percent higher than in 2014 and 16 percent above the five-year average level. More power companies are retiring aging coal plants and replacing them with natural gas units.

We can also expect to see a greater reliance on natural gas in the West, as less available water creates a decreased reliance on hydropower. In late January, snowpack levels were only about 25-40 percent of what they are normally are, and a weakening El Nino looks to be bringing less rain, which could create a drought in early spring.  During a good water year, hydropower can contribute to up to 30 percent of the power generation mix in the summer, which isn’t likely to happen this year.

As power companies consume more gas and production tapers off in 2015, we should expect to see natural gas prices eventually bottom out.

Now Is the Time To Buy

As natural gas prices continue to fall, long-term power prices, too, are within 1-2 percent of all-time lows. Since the start of the winter, prices have been down an average of $5.49 per mWh.

Taking advantage of these low prices now by purchasing a portion of your energy in advance can help offset the rising costs of capacity and transmission, which are occurring as power companies retire aging plants and build new infrastructure.

BCC offers a variety of energy pricing options, including the ability to lock in prices over the term of your contract, make smaller purchases over time based on market fluctuations or use a combination of these strategies.

Our energy management experts can help you identify the right solution to meet your needs. We also offer a variety of energy management tools that allow you to monitor prices and make smarter purchases based on the market.

Learn more about how you can be a proactive energy consumer with our pricing options and energy management tools—contact us today.

NYMEX Natural Gas Prices Fall

This has been a cold winter, which has lead to the jump in short term natural gas prices.  The chart below displays the prices for different time periods for Natural Gas Strips, as of January 24, 2014.  These contracts are used to determine prices for natural gas and many electricity contracts.  You can see that the price drops as time moves forward.  This market now provides lower prices for longer term contracts.Natural Gas PricesWhile the futures market is not a perfect crystal ball view of the future, it provides a good indicator for the direction of prices.  If controlling your energy costs is your goal, a longer term will provide better prices and price protection.

Contact the pros at Better Cost Control for more information on controlling your electricity and natural gas costs.

Natural Gas Prices – Rising

Making Sense of the Present Electricity Market

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  • Regional issues are ruling the day, when it comes to understanding today’s electricity market– gas & power correlations remain critical, but we continue to see increased frequency of separation.  There are fundamental factors that are behind this trend:
    • Northeast basis – too much info on this to put in this blog posting, but the short-story is that the region is short gas pipeline capacity and this year’s cold temps and pipeline constraints have caused huge gas spikes to New England (several days in $20-30 range) and to a less extent New York Zone 6 (>$20).  Day-ahead power has moved with gas with some spikes near $200/MWh. This is impacting long-term prices.  Unfortunately, the pipeline constraints are unlikely to be resolved in the near-term.
    • ERCOT Resource Adequacy – this issue is also not going away as ERCOT is expected to remain below is target for reserve margins and the increased offer caps are not expected to resolve the problem.  So do not expect summer premiums to disappear and there will be ongoing discussion on solutions to the problem.  Regulatory news and summer price spikes will both impact forwards.
    • PJM Capacity –the wholesale energy prices in the market remain low, but capacity prices vary greatly within the ISO – rising for most of the West and falling for the East over the next 2 years with certain areaa having exceptional spikes (ATSI).  Note that we have updated capacity charts that clearly illustrate this trend.
    • California Cap & Trade & SONGS outage- ongoing strength in forwards as Cap & Trade has been implemented and there is still tremendous uncertainty regarding SONGS, which has been shut down for almost one year.
  • Customer message:  The overall message is straightforward, but may be difficult for customers to accept since many have had consistent year-over-year price declines since the peak of 2008.
    • Year-over-year declines in gas have stopped with 2012 likely being the bottom.
    • Rangebound gas behavior for the near-term with modestly higher prices possible for 2014.
      • It makes sense that natural gas futures are higher than a year ago, but below long-term averages.  And we expect this to continue.  So don’t count on another spring dip – it is very unlikely to see a repeat of April 2012.
    • Both upside and downside are limited by coal-to-gas, production economics, storage, etc.
    • Regional fundamentals are causing significant regional risks that must be considered.  If you only focus on natural gas, you are exposed to significant regional risks such as New England winter spikes and ERCOT summer spikes.
  • Regional issues may provide a better rationale for customers to contract their electricity now.

Increasing Use of Natural Gas May Lead to Infrastructure Issues

Natural Gas Pipeline

Inexpensive natural gas is affecting the traditionally favorable cost of coal-fired power plants. With increased shale production, estimates of recoverable domestic gas reserves have surged in recent years.

Natural gas should continue to increase its use in power plants as the EPA creates greenhouse gas regulations for new power generation that will “effectively ban new coal-fired power plants,” ScottMadden said.

“The electric industry is beginning to adjust its generation complement accordingly, as the shale gas boom makes gas-fired power compelling for new generation, at least for the moment,” the firm said.

The nuclear power industry is also facing new concerns as the Nuclear Regulatory Commission moves forward with new requirements move than a year after the Fukushima Dai-ichi meltdown in Japan.

The natural gas industry faces its own concerns, however, These concerns range from public pushback over fracking, to the need to address “aging pipes,” according to the consultant’s report.

Potential unknowns facing the natural gas industry include regulation of expanded exports of liquefied natural gas (LNG). With so many of its nuclear plants closed post-Fukushima, Japan is seen as a growing market for LNG. Meanwhile, back in the United States, there is the potential for natural gas to play a growing role in transportation fuel for motor vehicles.

Pipeline flow capacity constraints are emerging issues for the natural gas and power sectors. To meet a possible doubling of natural gas demand, an additional 24,000 miles of pipeline could be required in the new future. Gas companies will be major players in this future build-out of transportation infrastructure for power generation.

Natural Gas Prices Rise

The U.S. Energy Information Administration (EIA) today reported the U.S. natural gas stocks declined by 135 billion cubic feet last week, above an average expected drop of around 127 billion cubic feet. Natural gas futures prices were about 2% higher in advance of the EIA’s report at around $3.26 per million BTUs, and rose to $3.29 immediately following the EIA report.

The EIA reported that U.S. working stocks of natural gas totaled 3.52 trillion cubic feet, about 389 billion cubic feet higher than the five-year average of 3.13 trillion cubic feet. Working gas in storage totaled 3.49 trillion cubic feet for the same period a year ago.

Storage levels remain slightly above the top of the five-year range even though the draw on stocks is higher than last week’s draw of 72 billion cubic feet. Gas prices remain about 17% from recent highs around $3.93 per thousand cubic feet.

To obtain a price quotation for electricity or natural gas for your business, call us at 617-332-7767.

 

Nstar Gas in Massachusetts files new natural gas supply rate – lowest since 2002

NStar Gas has submitted its annual gas rate to the Massachusetts Department of Public Utilities, and if approved the rate will be the lowest in a decade and 18 percent lower than last year’s rate.

According to a release from NStar Tuesday, the proposed supply rate will be 57.32 cents per therm, down from about 70 cents. If approved the new price will go into effect Nov. 1.

“As we head into another heating season with low prices, it’s no wonder we’re seeing record numbers of customers converting their heating systems to clean, efficient natural gas,” President of NSTAR Gas Rod Powell said. “In today’s economy, with the price of other fuels hovering near all-time highs, our customers will once again be glad they chose natural gas to keep their families warm this winter.”

According to NStar, the supply rate, known as the Cost of Gas Adjustment, reflects the price NStar pays for natural gas, with no profit made by the company on this charge. The proposed decrease reflects a continued decline in natural gas prices due in part to abundant domestic supplies.

First Time since 1973- Natural Gas and Coal Each 32% of Electricity Generation in the US for April.

This is a market update for June 29, 2012.

The Aug12 natural gas contract is up $.03 to $2.75. The Aug12 crude contract is up $2.64 at $80.34.

The Aug12 contract finished down 7 cents yesterday to $2.722.  The market was down as much as 15 cents at one point following the natural gas storage report which yielded an injection of 57 Bcf which was slightly above market consensus of 53.

As we have continued to talk about coal to gas switching a lot more in recent months, as natural gas prices have dropped to a level where it is competitive with coal.  The EIA reported this week that Natural gas and coal accounted for 32% each of net electricity generation in the US for April.  This is the first time gas has matched coal since the EIA began collecting data in 1973.  In 1973 coal accounted for 45.5% of generation while gas accounted for 18.3%.  Heat will continue to grip the majority of the country pushing up short term gas and electricity prices.

UGI Pennsylvania Announces Gas Rate Cut

Natural Gas PipelineA rate cut is coming for UGI Utilities customers. UGI  will propose a 3.4% decrease in its rates, effective Dec. 1.  The gas utility credited lower wholesale natural gas prices, stemming from increased supplies. The change, is subject to the state Public Utility Commission’s approval. If approved, gas would be its lowest point since 2002.

“An abundant supply of natural gas is allowing us to continue to pass these savings on to our customers,” said UGI’s Vicki Ebner. “Thanks in part to Marcellus Shale production, natural gas prices are at historic lows,” said Ebner, a senior vice president. Since gas peaked at $151.47 in June 2008, UGI has cut its rates eight times (including Thursday’s proposed trim). Those actions were offset slightly by one small increase last summer. Most recently, these reductions include a 4.3 percent drop on March 1 and a 13.5 percent cut last Dec. 1.

To enact the change, they ares asking the PUC to adjust its “purchased gas cost” — UGI’s cost to obtain natural gas on the wholesale market. The purchased gas cost accounts for about two-thirds of the customer’s total bill. By law, UGI must pass this cost directly to customers without markup, meaning the utility is not harmed or helped by changes in this cost. Instead, UGI makes its profit on delivering the gas to homes, businesses and other users, not by selling the gas supply. The gas utility has  320,000 customers in 15 counties.

Since gas supply prices fluctuate when the customer buys it from the utility, in this case UGI, fixed price contracts will protect gas customers from price fluctuations for a much longer term.

For information on obtaining fixed price quotations for electricity or natural gas, contact Better Cost Control, your independent electricity and natural gas broker and consultant.

Why you should use an electricity and gas broker?

The news story below is one more reason why working with a reputable electricity and natural gas broker helps to protect you from making mistakes when you contract your energy.  Like your independent insurance agent, we represent all the suppliers so we can obtain the best price and terms for your energy needs.  We’ve been doing this since 2002.

NEWARK (CN) – To “line its pockets at its customers’ expense” an alternative energy company promises lower rates and prizes if people switch to it, then jacks up its rates after the first month, a class action claims in Federal Court.      Lead plaintiff Yue Yu sued Energy Plus Holdings LLC and Energy Plus Natural Gas LP, electricity and natural gas suppliers licensed in New Jersey.
Yu says she received a flyer for Energy Plus along with her mileage statement from (nonparty) Continental Airlines. The flyer said that in addition to receiving 12,500 miles for signing up with Energy Star, Yu would receive more reward miles for every month she paid her bill and that customers “likely would save 10 percent over their local utility company.”
“Energy Plus’ advertisements, website and customer agreements indicate that its rates are market-based and highly competitive,” the complaint states. “Energy Plus uniformly and consistently represents that its rates are ‘competitive’ and reflective of market conditions and that the company will provide ‘the best competitive rate possible.’ For example, the company represents in mailers that ‘Energy Plus offers a market-rate product, which means we buy electricity every day on the open market.’ Energy Plus’ website states that its rates are ‘market-driven’ – that they are ‘based on market prices and other factors’ and are calculated monthly using an average in the customer’s region. In this market-driven process, the Energy Plus website represents, the company scours the market to find the best rates for customers: ‘Our approach is to purchase energy from each of these markets on a daily and monthly basis, which allows us to incorporate the most-up-to-date energy costs from each market into our rates.’ The clear implication is that Energy Plus is purchasing energy at market rates, where vigorous competition ensures the lowest possible prices for its customers.
“Furthermore, the company’s salespeople represent to potential customers that, in addition to receiving incentive rewards, they should on average save on energy costs if they switch to Energy Plus. Salespeople even tell customers to expect a particular percentage in savings.”
In response to Energy Plus’ ads, incentives and website, Yu says, she filled out an online application and switched her gas and electrical supplier to Energy Plus.
“For the first month of Energy Plus service, Ms. Yu received a discount of almost 10 percent as compared to her former provider PSEG. Thereafter, the company jacked up its rates and charged her from 30 to 71 percent more than PSEG each month,” the complaint states.
It adds: “After the first month with Energy Plus, customers’ rates will never reflect going market prices. Like playing in a casino using a stacked deck, a customer who sticks with Energy Plus hoping to break even will only sink deeper into the quicksand and enable the company to further line its pockets at its customers’ expense. In fact, Energy Plus’ rates are not competitive with other suppliers or in line with market factors. Customers who switch to Energy Plus can wind up paying as much as two to three times above the going rate in the area. The company’s customers in New Jersey and nationwide regularly complain that Energy Plus’ rates far exceed that of any other supplier, that their rates have doubled or more after the first month, and that they are often being overcharged by more than 100 percent as compared to remaining with their local utilities. …
“Energy Plus does not disclose these material facts to its customers but actively encourages the false perception that switching to and remaining with Energy Plus will mean savings to the cost-conscious consumer.”
In the four months after her first bill, Yu says, she was charged a total of $247 more than a PSEG customer would pay.
“Had Ms. Yu known that the rates she would be charged by Energy Plus were in fact substantially higher than the rates she was paying her previous energy supplier, PSEG, she would not have enrolled with Energy Plus,” the complaint states.
She seeks class damages and treble damages for consumer fraud, breach of faith and unjust enrichment.     She is represented by Steven Wittels with Sanford Wittels & Heisler, of Fort Lee.

Ohio Public Utility Commission Publishes New Apples to Apples Natural Gas Rate Comparison

Kudos to the state of Ohio for making it so much easier for businesses to compare the cost of natural gas when shopping for a competitive supplier. The latest comparison information was just published. The prices to compare are as follows:

Duke Energy for May 2012: $0.4130 per CCF

Vectron Energy for May 2012: $0.39655 per CCF

It is important to note that the above price is only for the month of May.  Indications are that prices are rising, so to protect yourself from rising prices, you may want to consider a fixed price gas contract.  You will need to pay a higher price now, but how much gas do you use during the summer? Trust us when we say that winter prices will not be this low.  Call it insurance against the winter gas costs.

Better Cost Control can help your company obtain the best natural gas contract prices and terms.  Contact us at 617-332-7767 x150 to learn more.