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Saturday, 06 March 2021 23:22

LAST WEEK OF HEATING DEGREE DAY REPORTING FOR THE WINTER SEASON, AND WHAT A SEASON IT HAS BEEN! ONE WEEK OF MARKET VOLATILITY LED TO ESCO BANKRUPTCIES, CLASS ACTION LAWSUITS, AND SKY HI RETAIL ELECTRICITY BILLS. END THE CHAOS WITH A RATE LOCK.

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Prompt month natural gas contracts settled the week at $2.70 / mmbtu down 2.5%. The 12, 24, and 36-month contracts were also down, settling at $2.90; $2.75; and $2.68 / MMBtu respectively.  The forward natural gas curve signifies a great time to lock in your retail power and gas prices for longer stretches of time.  Spreads between the short term and long-term natural gas contracts are compelling and continue to support the decision of locking your power and gas rates for longer stretches of time.  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 March 4, 2021 for the week ending February 26, 2021.  The overall storage level ended the week has now dropped below 2,000 technical indicators at 1,845 / MMBtu, a decrease in the system of 98 MMBtu.  Natural gas storage levels are 8.8% below the 5-year average, and are now 13.1% under the levels seen 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.

Heating Degree Days have declined back to their weekly averages.  When it is cold, demand for heating fuels such as natural gas spikes.  If supply is not sufficient to match demand, bad things happen to wholesale and retail supply.  We are continuing to track the heating degree days for some of the larger deregulated retail supply markets.  Heating degree days are a great indicator of demand for natural gas and the effects on the forward curve during the cold winter season.  See our bar charts to track your specific location.

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