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EnergyWindow MarketElert TM - March 2005
www.energywindow.com
March Elerts
Maryland -
The proposed Standard Offer Service (SOS) rates for June 2005-May 2006 have now been published. For medium-sized facilities (Type II) proposed SOS prices will mean increases of approx. 9% in BGE, 6-8% in Conectiv and 12-13% in Pepco. Competitive electric suppliers are reporting that Type III facilities (>600kW) that will default to hourly wholesale prices in June, that wish to avoid the volatility of hourly markets may be able to see fixed prices at or even below current SOS rates by going to market now.
New Jersey -
Annual BGS auction results are in and proposed tariffs posted. Fixed price bids are higher than last year but dampened somewhat because the lower auction prices from the past two years comprise 2/3 of the new rates. Winter and off-peak pricing have seen double digit increases in all three major utilities, but summer and on-peak prices are slightly higher and even lower (in the case of GST in JCP&L) year to year. As for hourly-priced customers, the new capacity prices are roughly half those of last year, though savings of $4.00-$5.00/MWH should still be available from deregulated suppliers.
Ontario -
Ontario Energy Board announced the new Regulated Price Plan (RPP) for small (<250,000 kWh) electric customers and Municipal, University, Schools and Hospitals (M.U.S.H.) sector accounts in Ontario on March 11. The two-tiered plan includes a global adjustment and calls for the first 750 kWh to be charged at $.05, and subsequent kWh at $.058. Larger customers will continue to be charged the Hourly Ontario Energy Price (HOEP). Typical contracts are for fixed commodity, for 3-4 years in duration. More at http://www.oeb.gov.on.ca/.
TX - A Good Time Any Time
According to a recent EnergyWindow trend analysis of select utility (TDSP) territories in Texas, any time is a good time to shop in Texas, especially for fixed price contracts. A study of Oncor, CP&L and HL&P Price to Beat (PTB) generation rates from 2002 to 2005 shows an average increase of $11.55/MWH per year in the utility benchmark price. By comparison, a sampling of actual retail contract prices over that same period indicated an average increase of $8.80/MWH per year. While this comparison is not strictly statistically valid, it is consistent with the expectation that both retail prices and utility rates are driven by many of the same factors (primarily natural gas prices). This suggests that the average rate of increase of both retail prices and the PTB is roughly 14% annually; but the absolute dollar increase in the PTB is greater.
|
TDSP |
Annual Increase
($/mwh) |
|
$/mwh |
% |
|
Oncor |
$ 10.12 |
14.28% |
|
CP&L |
$ 12.89 |
11.88% |
|
HL&P |
$ 13.05 |
14.11% |
|
Avg PTB |
$ 11.55 |
13.85% |
|
Avg Retail |
$ 8.80 |
13.91% |
|
If trends were to hold true and retail prices continue to increase proportionately, there would be an average of 24% savings between the two, but absolute savings per MWH would rise from $2.75 to $10.99. Fixing a price at any time during the observation period would have yielded anticipated savings of about 24% against the average PTB, but customers would have actually realized far more as the tariff rates rose while the contract remained fixed. In fact, according to this study, a customer that took out a three-year contract with equal load in the three TDSPs in 2003 and achieved an expected savings of 22% would, in fact, have realized 47% savings during 2005. Based on our assumptions, it's hard to believe that an indexed rate could produce anywhere near that level of savings. The bottom line is that, if you believe that gas and electric prices will likely continue their apparently inexorable upward trend, perhaps the age-old wisdom imparted by many a quarterback in the last two minutes of a game, namely "Go long!" is good advice ... and the longer the better!
Quick Buyers' Tip
As the natural gas futures markets continue to confound those who once believed that supply and demand actually had a bearing on price, another interesting phenomenon has occurred. Summer-peaking electric markets like PJM are now seeing forward winter prices driven almost as high by super-high winter gas futures prices. Among the implications of this is that short-term contracts ending in November or December may offer up savings against fixed utility tariffs that have higher summer-season components, such as those in Maryland, New Jersey, and Washington DC.
Natural Gas Pricing Insight
If you're wondering about the recent apparent disconnect between natural gas storage levels and gas prices, you might want to read a recent report produced by Simmons and Company International. Their hypothesis, which they support with data and analysis, is that the markets are more focused on potential long-term supply and production shortfalls. They show that the previous inverse relationship between storage levels and price hasn't held for the last two years.
See Outlook for Natural Gas: 2005 and Beyond from Simmons and Company International (linked with permission).
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Copyright © 2005 EnergyWindow, Inc. All Rights Reserved.
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