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EnergyWindow MarketElert TM - March 2006
www.energywindow.com
March Elerts
Delaware Rates Jump in May -
Delmarva electric supply rates will jump by 64% to more than 100% beginning on May 1, 2006. Standard Offer Service had been frozen for several years, and with today's higher market rates, shopping credits will be in the $95 to $110/MWh range. See http://www.delmarva.com/home/choice/de/tariffs/default.aspx.
New DC rates to provide headroom -
New Standard Offer Rates in the District of Columbia will be rising to over $100/MWh beginning in June, offering up the prospect of an active market providing wholesale rates remain low. See http://www.pepco.com/home/choice/dc/rates/future.aspx.
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New Jersey Rates Heat Up But FP Accounts Still Out in the Cold -
Fixed Price supply rates for commercial customers in New Jersey will rise about 30% in June, but suppliers report that current market conditions prohibit savings at this time. More details at http://www.bpu.state.nj.us/home/news.shtml?05-06.
Winter Warmth Postpones Upward Trends
The warm winter has resulted in gas storage levels well above the maximum in the five-year range and 54% above the 5-year average. So, although it's nice that we're a long way from prompt-month prices of $15/MMBtu or better, why are gas (and subsequently electricity) prices still 13% higher year-to-year for the next 12 months and about 30% more for the following years of the NYMEX Henry Hub futures (as illustrated in the gas futures prices chart)? It's all supply and demand, say experts. Though there are lots of wells being drilled, they are producing less gas, and wells need to be drilled deeper, so production is more expensive than in the past. Besides, it will take years for significant impact to come from new fields or expanded infrastructure. LNG imports will help ease the supply pressure, but new terminals are hard to site and we still need to be willing to pay top dollar if we want to divert deliveries from countries like Japan and Britain. And importing energy comes with its own set of problems. (Wasn't a major attraction of natural gas the fact that it was a domestic resource?) Canadian imports have been the greatest source of replacement gas, but soon Canadian companies will be using the bulk of this gas to extract oil from the great reserves of shale oil found there.
So, what are the practical implications of today's (relatively) low gas prices? Many end users are buying now for terms of two to five years (even in markets where new prices don't start until January 2007) for at least a part of their supply portfolio. Others are locking in partial loads for various terms and keeping a tight watch on prices. Experts warn, however, that geopolitical events, unusual weather (hot or cold) and of course, storms (or the rumor of storms) can easily drive energy prices into the stratosphere.
Quick Buyers' Tip
When developing an internal view of energy risk, companies need to put two prime issues into perspective. These issues are market backwardation and the propensity of energy prices to rise over time. Backwardation causes prices for longer-term contracts to be lower than shorter terms, and generally rising prices make fixing a price over a longer term a good way to avoid the increase. Both phenomena have been evident over the short history of deregulated energy markets and are important factors to weigh when making your next energy-buying decision. For more information, call us at 877-444-0086.
Integrating Energy Procurement Into Your Supply Chain Strategy
Businesses ignore the cost of energy - one of the top operational expenses - at their own peril. A new EnergyWindow white paper takes you through the steps required to fully integrate energy into your overall purchasing strategy. (http://www.energywindow.com/press/PowerStrategy-StrategicSourcingOfEnergyWhitePaper.pdf)
Energy: A New Ballgame
Deregulation and price fluctuation make managing energy costs more challenging, but there are still savings to be found. (http://www.energywindow.com/press/363328.pdf)
Free Market Data and Information Available Here!
(www.energywindow.com/decisionsupport.shtml)
EnergyWindow has a wealth of free energy data and information available on our site. Simply follow the link above, register if you haven't already and you'll get instant access to wholesale and spot market energy prices, a searchable database of energy-related articles, links to energy career sites, supply reserves, weather, securities information, the MarketElert archives and much more. It's all there, available 24 hours a day, 7 days a week - and best of all, it's free!
Copyright © 2006 EnergyWindow, Inc. All Rights Reserved.
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