Natural Gas Prices

Natural gas is one of the most volatile commodities in the world and is often a top-five spend category for commercial and industrial corporations. This combination makes calculated purchasing strategies for natural gas a must. The opportunity to take advantage of buying opportunities and mitigate price risk is the result of vigilant monitoring of natural gas prices coupled with a sound procurement strategy.

NYMEX Natural Gas Futures Prices ($/MMBtu)
Trend Market Close 2/8/2008

This short-term strip (March-May) is trading lower ($8.30)
than any of the longer-term strips. Reasons include
adequate gas in storage for the rest of the 2008 winter
and warmer-than-normal forecasts for the next three months.

September and December proved to be the best buying
opportunities for the second consecutive year (2006 not
shown). Despite better market fundamentals, 2007 prices
were approximately 15% higher than 2006. This could be
a sign that we are seeing a new floor at approximately
$7 for the 1-year wholesale price of a flat load profile.

These natural gas price charts show how the natural gas futures contracts have traded on the New York Mercantile Exchange (NYMEX), which is widely used as the nation’s benchmarking price. This is approximately equivalent to the wholesale price a company would pay for gas for delivery over the next 3, 12 or 36 months. Actual retail price will be higher to reflect interstate pipeline delivery charges, supplier overhead, etc. The NYMEX futures prices drive retail natural gas prices worldwide. Natural gas and other commodity futures prices can be found at: www.nymex.com, www.cme.com, www.futuresource.com and www.ino.com.

The 3-year strip is trading as a mirror image of the 1-year
strip. Both have been channeling $8 to $9 for some time.
The US supply infrastructure is back at pre-Hurricane
Katrina capacities, but prices, while much lower than
their peak, have not returned to 2004 levels and are not
likely to do so.

Electric Customer Switching Statistics in Deregulated Markets

In the US, there are two ways for states to manage the purchase of electricity and natural gas; the market can be regulated or deregulated. In states that are not deregulated, the local utility maintains a monopoly, but their rates must be approved by the respective state public utilities commission. In states that have deregulated their electric and natural gas markets, customers can choose a supplier other than their local utility. These “deregulated marketers” compete to win business while basing their rates on prevailing market conditions. Commercial and industrial customers choose to buy electricity from deregulated marketers for a variety of reasons, including lower price, fixed-rate offers not available from the local utility, and purchasing electricity that is generated by renewable energy sources.

These charts show what percentage of electrical load (in Megawatts) has been switched away from the regulated local utilities to the competing marketers. Customer switching statistics are periodically collected and reported by various state Public Utility Commissions to assess the health of the competitive marketplace in states that have deregulated their energy markets. For more information, visit the website listed for each state.

Commercial and Industrial (C&I) Electric Load
Switched to Deregulated Marketers
Source: State Utility Commissions

Ohio shopping is non-existent in much of the state, and
most of the above accounts switched several years ago.
The debate about Ohio’s electric future is in full swing;
we should see some direction by mid-year.
www.puco.ohio.gov

Shopping in the Empire State remains strong. Statewide,
40.6% of the load is served by deregulated marketers.
That represents a 14.6% increase from the prior year.
www.dps.state.ny.us

Virtually all of Maryland’s large customers and more
than half of the medium sized load are being served by
deregulated marketers. Maryland shopping remains strong
statewide with 93.7% of the largest load and 74.9% of the
total C&I having switched. www.psc.state.md.us/psc