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Saturday, 26 September 2020 23:02

COVID AND COOL FALL TEMPERATURES CONTINUE TO DEPRESS DEMAND FOR POWER AND NATURAL GAS. EXPECT WEAK DEMAND AND WEEKLY NATURAL GAS STORAGE INCREASES TO DRIVE A STABLE FORWARD PRICE MARKET. VARIABLE RATE CONTRACTS ARE NOT THE ANSWER.

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Prompt month natural gas contract was up 4.4% and settled the week at $2.14 / MMBtu.  The 12, 24, and 36-month contracts were also up, settling the week at $2.92; $2.83; and $2.73 / 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.  Volatility is low, with weak demand.  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 24, 2020 for the week ending September 18, 2020. Natural gas storage in the system saw increases for the week with the fall seasonal temperatures coming down.  The overall storage level ended the week at 3,680 / MMBtu, an increase in the system of 66 MMBtu.  Natural gas storage levels are 12.4% above the 5-year average, and 15.9% 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.

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