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Sunday, 25 October 2020 14:09

POWER AND GAS MARKETS TRENDING UP, BUT STILL STABLE. GULF COAST EYES ANOTHER STORM WITH LOUISIANA ONCE AGAIN IN THE CROSS HAIRS. PLEASE BE SAFE.

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Prompt month natural gas contract was up 7.1% for the week, settling at $2.97 / MMBtu.  The 12, 24, and 36-month contracts were flat for the week at $3.05; $2.93; and $2.81 / MMBtu respectively.  Covid 19 continues to crush demand for 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, and demand is weak.  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 October 22, 2020 for the week ending October 16, 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 3,926 / MMBtu, an increase in the system of 49 MMBtu.  Natural gas storage levels are 9.1% above the 5-year average, and 9.6% 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.  This is not a risk that customers should be exposed to.

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