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Monday, 15 July 2019 19:59

SO MUCH FOR THE START TO A MILD SUMMER. COOLING DEGREE DAYS ARE NOW AT OR ABOVE THE 5 YEAR AVERAGES ACROSS ALL LOCATIONS WE TRACK. ELEVATED COOLING DEGREE DAYS LEAD TO INCREASED DEMAND, SHORTAGES OF AVAILABLE NATURAL GAS, AND PRICE VOLATILITY.

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The prompt month natural gas contract ended the week up slightly, settling at $2.45 / MMBtu.  The 12, 24, and 36-month contracts were also up, settling at $2.58; $2.59; and $2.60 / MMBtu respectively.  There is still great value in rate locking your power and gas supply with fixed price term contracts.  While wholesale power and gas markets are stable, there are still significant benefits to rate locking power and gas retail supply contracts.  Allow your ESCO supply company to work for your service, and manage market volatility with fixed price contracts.  Variable rate contracts do not offer price protection (or value) in my own opinion.

New gas storage levels came out on July 11, 2019 for the week ending July 5, 2019. The overall storage level ended the week at 2,471 / MMBtu, an increase in the system of 81 MMBtu.  Natural gas storage levels are 5.4.% below the 5-year average, and 12.5% above where they were 12 months ago.  Keep in mind that this is storage in the system.  As you can see from the charts, the storage levels are below historical averages, but there are still ample supplies of natural gas in the ground that has yet to be tapped by producers.  While it is good to see storage break the 2,000 MMBtu technical indicator, more gas storage would be nice to see, especially during the hi potential demand period in anticipation of air conditioning units being turned on.

Variable rate plans are meant to be pegged to an index (keep these market movements in mind when evaluating comparable billing periods!). While pass through components such as capacity and ancillary services costs have come up, the commodity itself remains in check.  The low-price environment continues to present a great opportunity for commercial and residential customers to lock in power and gas rate plans for the next 12-month period and beyond.

Attractive opportunities are in the market for customers to hedge out price volatility.  Keep the risk where it belongs, with your well-seasoned energy supply partner.

Weekly changes in cooling degree days saw activity across all cities we track.  All cities are now at or above their historical averages.  Weather continues to be the most significant risk to all customers who have chosen not to hedge power and gas price volatility with fixed price contracts.  Great time to rate-lock power and gas supply for retail customers.  When cooling degree days go up, natural gas demand goes up.  When there is not enough gas in your local market, bad things happen to customers on variable price power and gas contracts.

Hurricane season is upon us and has the potential to bring regional devastation and additional power and gas price volatility.  Hurricane Barry drenched parts of Louisiana, but power and gas markets were for the most part unaffected.  The best hedge continues to be a fixed price power and gas products for residential and commercial customers in deregulated markets.

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