Electricity Rates Drop as Natural Gas Supply Grows

Electricity Rates Drop as Natural Gas Supply Grows

Commercial Electricity Rates ChartNatural gas closed the short week before Easter down 5.3 cents to settle at $2.088 pre MMBTU. This drop was the result of another 42 BCF of gas being injected into storage, which surpassed industry estimates. The natural gas boom is simply flooding the market with more supply then we can consume. The failure of winter to show up left inventories well above the 5 year average when the heating season wond down.

Commercial electricity rates continue to fall in lock step with natural gas. However, as is often the case when NG tanks, heat rates have steadily increased. The increase in heat rates is likely to continue if NG cannot find a bottom and reverse the trend. It will be interesting to see how the big producers across the county make their best efforts to survive this brutal market. But what is bad for producers is good for businesses.

The curent market is providing an excellent opportunity to hedge extremely low commercial electricity rates for years into the future. Below is a quick and dirty snapshot of the average price across the country. The prices reflected in the table below are indicative wholesale rates, which is the price at which retailers are able to buy electricity which is then built up to a retail price by including market specific components not reflected in the wholesale price alone.

 Strip Average

Average / kWH

Calendar 2012$0.028
Calendar 2013$0.035
Calendar 2014$0.039
Calendar 2015$0.041
Calendar 2016$0.043
Calendar 2017$0.046
Calendar 2018$0.049



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