Electricity in the Summer

Happy Friday –

Once again, we had an excellent natural gas storage report come out yesterday. The analysts were looking for a build up of +102 bcf, and we got an actual build of +110 bcf. That makes it seven weeks in a row natural gas has increased over 100 bcf in storage which I believe becomes the new record.

More important, this week’s increase in gas was 16 bcf greater than the corresponding week last year, and 29 bcf above the 5-year average. This still leaves us 822 bcf below the 5-year average. The new current natural gas contract (August) came down to close at $4.441 on +Thursday, and is down another 5.5 cents +today.

I believe we are looking at the lowest point for gas and electricity rates now until later this Fall as we start the warmer weather and the air conditioners kick in. All clients with electricity contracts coming up within the next four months should lock in rates NOW because rates will be going back up soon as we start hearing about “above average” temps this Summer.

The gas in storage is significantly below the five-year average because of the horrible Winter weather we endured this year and we used gas to fire the electricity power plants as well as heat our homes up north. If we run into significantly hot temps this Summer we will see a squeeze in natural gas with a spike in electricity rates probably in August.

Customers who do not sign up now to lock in this week’s rates may find “sticker shock” come August if they wait. Some customers may want to gamble and just go month-to-month with ERCOT’s real time rates. That is a HUGE GAMBLE. All we need to look at is the real time rate in August 2011 when Texas had ten days of record temps and record demand for electricity. This year could be worse.

Each year Texas has 400,000 more people move to our great state. They all use electricity. The commercial customers continue to expand as we employ these new folks coming to the Lone Star State. Obama’s EPA too has tried to drive the cost of electricity up with their new coal regulations. And this year we add the fact we already have 822 bcf less gas in storage with fears we will not have enough to heat our homes in the Winter, and you have the potential of the most significant spike in prices ever.

This is the year, with all of the problems listed above, we could find the highest daily rates ever. We currently have electricity rates in the low 5 cent range. The average daily rate in August of 2011 when we had the last spike due to record heat in Texas was 13 cents with some days above 30 cents per kWh. Customers should not take this gamble this year.

Lock in the low fixed rates today.