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EnergyWindow MarketElert TM - September 2005
www.energywindow.com
September Elerts
Katrina Update -
Oil and natural gas output from the gulf region is expected to be back to 90% of pre-Katrina levels by the end of October, but it may take three months or more to get that output into wholesale markets. 231,000 of Entergy's 1.1 million customers in LA and MS are still without power according to the company.
Massachusetts -
With LICAP stalled for the moment (at least until October 2006), a public policy think-tank has released a study supporting the move (available at
http://necore.org/docs/press/policy_0905.pdf). In the meantime, Western Mass Electric has raised their basic rates for medium and large general service (MGS/LGS) customers by an average of 49% over 2004 prices. Earlier this month NSTAR's rates for their larger accounts rose 35% to 49% year to year.
Texas, NY, Mass - Markets to Move in
Hurricane Katrina has only exacerbated the upward trend in natural gas and electricity prices and, with hurricane season not yet ended, and the total impact (on both supply and demand) of Katrina's destruction still not fully understood, there are reasons to argue for both higher and lower prices in the short term. Longer-term (2-3 years) most experts agree that there are more upward pressures than downward. Absent widespread cutbacks on demand or a global recession, these higher wholesale prices will eventually be reflected in higher retail energy costs, especially in states where utility rates are increasingly based on wholesale prices (NJ, MD, TX, NY, MA, ME, OH, and soon to be in IL).
Despite these market conditions, energy cost savings can be found, particularly if your company operates facilities in Texas or New York, where favorable buying conditions still exist. In Texas utilities have exhibited a peculiar talent for keeping their prices well ahead of wholesale markets, making it a place where shopping is always a good idea. In the chart above, you can plainly see that fuel cost increases for five Texas utilities from 2003 to 2005 have averaged 26% per year, making this a market in which to strongly consider longer-term, fixed rates. In New York, market-base rates prevail but regulatory incentives provide the impetus for switching (see EnergyWindow's April 2005 MarketElert for more). Other markets that bear consideration at this time are Massachusetts and Maine, where some newly posted default regulated supply rates have risen by as much as 49% (see Elert above), a trend likely to continue at a greater pace than has been the case to date.
Quick Buyers' Tip - Fix or Float?
Should you fix a price or float with the market in these days of price volatility? This is a good question, but one not able to be fully explored here not only because of its overall complexity but because the answer is different by region and by end-user. Seeking advice from a professional, trusted resource is a wise step. Knowing your company's risk tolerance and current contract status is fundamental input for developing a meaningful strategic energy procurement plan.
How Can Technology Jump-Start Your Approach to Energy Purchasing?
(Reprinted with permission from Institute for Supply Management)
Small Gas Buyers Work to Mitigate Price Increases
(Reprinted with permission from Pipeline & Gas Journal)
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(www.energywindow.com/decisionsupport.shtml)
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