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Sunday, 25 August 2019 13:14

THIS PAST WEEK WAS THE FINAL WEEK OF SUMMER, AND COOLING DEGREE DAYS SHOWED HIGHER THAN NORMAL WEEKLY STATISTICS. ELEVATED COOLING DEGREE DAYS SHOW THE EFFECT THAT WEATHER HAS ON ENERGY USES WHICH DRIVES PRICE VOLATILITY.

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The natural gas futures market saw spot prices trending down for the week, with longer dated contracts off slightly from the prior week.  The prompt month natural gas contract settled at $2.15 / MMBtu.  The 12, 24, and 36-month contracts settled at $2.31; $2.36; and $2.39 / MMBtu respectively.  The curve is tight, so why not take advantage of longer dated retail power and gas supply options.  Take risk off the table with the low spread environment.  Allow your ESCO supply company to work for your business or residence, 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 August 22, 2019 for the week ending August 16, 2019. The overall storage level ended the week at 2,797 / MMBtu, an increase in the system of 59 MMBtu.  Natural gas storage levels are 3.6.% below the 5-year average, and 15.2% 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.  As we approach the hi gas demand winter season, keep an eye on the relatively low gas storage inventory levels.

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.  As a customer, you have the choice to decide who holds the price volatility risk.  Protect yourselves with fixed price contracts.  Those customers who elect a variable rate plan are 100% exposed to price volatility driven by weather and other market conditions.  Allow your supply company to do their job and manage the volatility by offering you a fixed price contract.

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 continue to show that the markets are experiencing hi summer temperatures which lead to market volatility risk.  All cities we track are seeing above average weekly temperatures.  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 Dorian has formed in the Caribbean, posing a threat to the Dominican Republic, Haiti, and Puerto Rico before continuing a path that threatens Florida, Georgia, and the Carolinas.  It is still too early to tell what effects it will have if any, but be prepared for inclement weather and energy market volatility.

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