 |
EnergyWindow MarketElert TM - May 2006
www.energywindow.com
May Elerts
Select Energy Goes to Amerada Hess -
Amerada Hess has agreed to buy Northeast Utilities retail energy marketing subsidiary, Select Energy, an active retail electricity and natural gas marketer in New England, New York and the Mid-Atlantic states.
PA PUC to Investigate Rate Hike Requests -
The Pennsylvania Public Utilities Commission is going to review requests for rate hikes proposed by FirstEnergy on behalf of their Metropolitan Edison (Met Ed) and Pennsylvania Electric Company (Penelec) affiliates. If approved, a portion of these increases will go to increase the credit end-users get for shopping for retail supply, thus unraveling restructuring plans otherwise slated to end in 2010 as well as setting a precedent for the state's other utilities.
PJM Classic Bears Low-Hanging Fruit
Dramatic increases in electric rates have been or soon will be effective in New Jersey, Maryland, Delaware, and Washington, DC. That's the bad news. The good news is that retail electric suppliers are able to save end-users money off tariff rates in all these areas except New Jersey, at least in the short term. Recent auctions have yielded savings of 10%-25% off supply charges in Maryland, Delaware and DC, with savings of 3.5 cents per kWh or more not unheard of in Delaware.
The future price of electricity, especially for the next 12 months, is significantly lower than was the case when these prices were set. The chart compares futures prices for natural gas (which are inextricably linked to wholesale electric prices in PJM and elsewhere) on similar days this year, last year and the year before. The NYMEX Henry Hub natural gas futures trade 60 months, or five years, out. The chart shows the 12-month average price for each of those years. You'll notice that prices descend year to year in all three years (a phenomenon known as backwardation) with the exception of the first year in the current market. Obviously, prices are not low relative to the past, but clearly Year One is a relative bargain compared with the rest of the yearly averages. If you haven't shopped in Delaware, Maryland or DC, time is running out to avoid increases or miss the current lower 12-month prices.
Quick Buyers' Tip
As the charts above reveal, futures prices for the next 12 months are low relative to the subsequent years, so is the conclusion to seek only 12-month contracts and wait for the market to drop? Generally speaking, prices rise over time as indicated by the distinct upward motion between each year's prices in the second chart. In fact, if you had bought a strip of natural gas for June 2007-May 2008 in 2004 you would have paid $4.98. Buy the same strip a year later it would have been $6.86, a ridiculous-sounding price then, but quite attractive today, when that same strip will run you $9.98. It pays to look at a variety of term lengths and then make decisions based on your company's risk tolerance and contract term window. It also pays to keep a constant eye on the market for periods of time when futures markets are lower than what trends would indicate and contract then, rather than wait for your current contract to expire.
Shopping for Energy Bargains: Strategies for Savings
STORES magazine talks to JC Penney and EnergyWindow to learn how we teamed up to soften the impact of rising energy costs and protect the retailer's bottom line. (http://www.stores.org/archives/2006/4/edit20.asp)
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)
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.
Was this newsletter useful to you?
Please click here to register your opinion.
Refer this newsletter to a colleague.
Please click here to forward a copy.
|
|
 |
|