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Saturday, 12 September 2020 22:47

SEASONAL FALL TEMPERATURES ARE DRIVING DOWN DEMAND FOR BOTH POWER AND GAS AT THE WHOLESALE AND RETAIL LEVELS. PRICES SHOULD COME DOWN AS A RESULT, BUT IN DEREGULATED MARKETS, CUSTOMERS MAY OR MAY NOT SEE ANY BENEFIT.

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In the holiday shortened trading week, prompt month natural gas contract fell 12.3% and settled the week at $2.27 / MMBtu.  The 12, 24, and 36-month contracts were also down, settling the week at $2.91; $2.82; and $2.72 / MMBtu respectively.  Covid 19 continues to crush demand in both power and natural gas.  This is for the liquid Henry Hub delivery point.  The forward natural gas curve signifies a great time to lock in your retail power and gas prices 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 September 10, 2020 for the week ending September 4, 2020. Natural gas storage in the system saw big increases for the week with the fall seasonal temperatures coming down.  The overall storage level ended the week at 3,525 / MMBtu, an increase in the system of 70 MMBtu.  Natural gas storage levels are 13.1% above the 5-year average, and 17.6% 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.

Variable rate plans are meant to be pegged to an index that are not necessary tied to the prompt month gas trading levels (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.  Summer season brings the potential for elevated price volatility in wholesale and retail natural gas and power markets.  This is not a risk that customers should be exposed to.

We are well into the summer season, and early data has deregulated market locations warmer than historical average temperatures (elevated cooling degree days).  Air conditioning technologies will increase demand, and cause elevated levels of price volatility throughout markets that are open to choice.  Allow your ESCO to manage this price risk on your behalf with fixed price electricity and natural gas supply contracts.

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