Buy Energy Now – It Could Get Worse

Buy Now – It Could Get Worse

As part of my daily ritual, I open the Henry Hub Natural Gas Futures and Settlements site and look where natural gas is trading.  I do this because I know that natural gas produces a large amount of electricity in the US, and where the price of gas goes, so goes the price of electricity. As of 9:45 AM, June 7, 2022, natural gas is trading $9.361/mcf. I cringe. What does this mean? It means that the price of natural gas, which traded well below $6.00/mcf only months ago is at levels we have not seen in years. It also means that if you want to secure a price of electricity in the future, now might be the best time to start.

If you are not shopping for electric generation today or have an electric contract that is due to expire in the future, you have an opportunity to request future pricing now. Securing prices today for a future contract start can serve as a hedge against even higher future pricing. If you continue to wait, it may only get worse. Take a look at this graph from Constellation’s Energy Market Update from May 24, 2022:

A customer shopping for electricity with a contract start date of 2024 can avoid 2023 higher prices. Without 2023 pricing included in a contract, the generation price would average between $48 – $53/MWh with a 2024 start versus $48 – $75/MWh with a 2023 start. There are other components of price including capacity, transmission, ancillaries, risk, and margin, but the price of electricity accounts for most of the cost in a generation contract. While you might not want to contract today, you should absolutely consider requesting pricing for a future start date. We provide our Sherpa by FirstEnergy Advisors™ web platform that lets you set up and account, enter data and go out to the market and request a Rate Check.  There is no obligation to contract, but you can see supplier offers for contracts with future start dates compared to immediate or 2023 start dates.

When should I secure a price for Electricity?

It is time to secure a future price for electricity today. The price is lower than current and 2023 pricing. It is also a way for you to create budget certainty for your company and its products. I encourage you to do this now as the price of natural gas is trading at $9.35/MCF at the Henry Hub as of 11:35 AM, June 7, 2022 – still over $9.00/MCF.

Image Credit:  Tezos