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Sunday, 05 April 2020 01:55

WINTER VOLATILITY SEASON HAS ENDED, AND SO HAS OUR HEATING DEGREE DAY TRACKING. OBSERVATIONS ACROSS ALL DEREGULATED MARKETS WE TRACK AS CONSISTENT, WHERE THE STATISTICS WERE ABOVE AVERAGE IN THE BEGINNING, SCALING DOWN TO BELOW AVERAGE IN THE END.

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Prompt month natural gas settled flat for the week at $1.62 / MMBtu.  The 12, 24, and 36-month contracts were up, settling the week at $2.25; $2.36; and $2.37 / MMBtu respectively.  This is for the liquid Henry Hub delivery point.  The curve signifies a great time to lock in your retail power and gas rates for longer stretches of time.  Those customers on variable price plans will see the volatility in their unhedged power and gas prices.  Take risk off the table with the low term spread environment.  Allow your ESCO supply company to work for your business or residence, and manage market volatility with fixed price contracts for term length.  Variable rate contracts do not offer price protection (or value) in my own opinion.

New gas storage levels came out on April 2, 2020 for the week ending March 27, 2020. The overall storage level ended the week below the 2,000 mark at 1,986 / MMBtu, a slight decrease in the system of 19 MMBtu.  Natural gas storage levels are 17.2% above the 5-year average, and 76.8% above where they were 12 months ago.  Keep in mind that this is storage in the system.  There are still ample supplies of natural gas in the ground that has yet to be tapped by producers.  Expect to see similar natural gas storage withdrawals as customers need heating fuels for their residences and businesses.

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.  Winter season is arguably the high point of wholesale natural gas and power price volatility.  This is not a risk that customers should be exposed to.

We are now entering into the shoulder week season.  Expect natural gas inventories to climb as the result of weak demand until summer temperatures begin to elevate.  Air conditioning technologies will increase demand, and cause elevated levels of price volatility throughout deregulated markets.  Allow your ESCO to manage this price risk on your behalf with fixed price electricity and natural gas supply contracts.

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