Why Buy Natural Gas and Electricity Now? It May Not Be This Affordable Again Any Time Soon!

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By Brendan Boyle, Director, Market Intelligence, Transparent Energy, September 2025

The summer of 2025 was marked by generally mild weather nationally. Following an early June heat wave, population-weighted cooling degree days came in much lower than expected, and well below the five-year average. This, combined with record-setting natural gas production, helped keep energy prices low in the near term.

The 12 and 24-month forward gas price strips reached their lowest level since January; however, prices further out on the strip were a bit more stubborn, as indicated in the graph below:

The gas futures market has consolidated to where calendar strips 2026 through 2029 are trading in a range between $3.69 and $3.93 per MMBtu. This represents a fantastic opportunity to secure long-term budget stability at an attractive price level.

What About Electricity?

We’ve previously documented the strong correlation between the cost of natural gas and electricity, and that remains unchanged. Electric markets, however, are in the midst of a transition, and there is an opportunity to fortify your position by taking some of the forward risk off the table and capturing value in the forward energy market while it is still available.

Last month we highlighted the changes occurring in capacity markets, as the cost of that electric supply component soared substantially higher in nearly all deregulated territories. The largest piece of the electric supply equation is still the energy portion – the actual electrons being moved from power plants through transmission lines and into your facility. Energy accounts for the bulk of electric supply costs and is by far the most volatile cost component. Here is a look at wholesale energy price settlements at PJM’s main trading hub, displayed in two formats:

Figure 1 – PJM West Hub Hourly Real-Time Prices (Chart):

Figure 2 – PJM West Hub Hourly Real-Time Prices (Monthly Average):

Figure 1 shows real-time (index) prices being mostly stable except for a few hours when prices spike to extreme levels ($3,700 per MWh, or $3.70 per kWh on 12/23/22). In December 2022, the real-time market shot above $1.00 per kWh for a total of 16 hours during a 5-day storm that coincided with the end of year holidays. Figure 2 drives home the point that price volatility – even during a very brief period – led wholesale prices to average more than $0.12 per kWh for the entire month! This is before accounting for capacity and the other supply-related components that make up the total monthly cost.

Even with cooler-than-normal temperatures across most population centers, prices this past summer settled substantially higher than the prior two years. Over the past decade, less risk-averse end-users benefited by maintaining a certain level of exposure to index market volatility. While 2022 was extremely expensive, most other years yielded relatively low prices when viewed over a long term. That was because power markets have been well supplied and reserve margins (extra power resources beyond what is needed) were approaching all-time highs. When supply outpaces demand like it did during the first half of the decade, prices tend to remain low. Yet, looking ahead to 2026 and beyond, it seems likely that the recent stretch of energy abundance is nearing an end.

How Are Conditions Changing?

Every deregulated system operator (CAISO, ERCOT, ISO-NE, MISO, NYISO, and PJM) has acknowledged that electric load growth during the balance of the 2020s will threaten the ability to provide reliable power at affordable prices.

PJM anticipates 32,000 MW of new large load additions by 2030, which represents a 20% increase in electric demand. In one scenario, ERCOT expects peak demand more than doubling over the next 5 years. Similar growth is anticipated across the country, led by the need for new data centers and the electrification of the heating and transportation industries. Looking at forward power prices, market participants carry a substantial level of skepticism that prices will revert lower.

The data and graphics above demonstrate past performance of variable index markets, in this case for PJM’s Mid-Atlantic territory. Now let’s take a more granular look at forward pricing data in the Texas market.

Below is a chart focusing on summer electric prices during on-peak hours in ERCOT’s North zone. These are typically the most expensive hours of the entire year:

Energy buyers who entered the year unhedged had little opportunity to purchase electricity for the summer of 2025 at a rate below $110 per MWh. As the calendar moved into March and April, prices for summer peak power shot above $140 per MWh. Prices for the August/September on-peak package only dropped once the usual Texas summer heat failed to sustain any momentum at the end of July.

Despite relatively calm weather, robust regional gas production, and strong renewable output, there was barely any correlated downward price movement for the summers of 2026 and 2027. Reserve margins continue to shrink as load growth outpaces new supply.

On top of the demand crunch is the uncertainty of new supply (power plants) being connected to the grid. New York (Empire Wind) and New England (Revolution Wind) are counting on substantial offshore wind projects that are in various stages of completion and now facing political opposition and major funding cuts.

Across ISOs, the wait list to build new projects is long, and, according to U.S. Energy Department Secretary Chris Wright, “about 95% of the U.S. grid interconnection queue is made up of wind, solar, and battery storage projects, and the vast majority of them have no chance of getting built.” The Trump administration is focused on moving away from renewables towards nuclear and fossil fuel generation. There is a lag time of several years before any new baseline generating stations can be permitted and built. Earlier this year, the Department of Energy issued an emergency order extending Pennsylvania’s Eddystone coal-fired plant beyond its intended life. Grid Strategies estimates it will cost more than $3 billion annually to prevent retirement for these aging facilities.

When Do I Need to Act?

In short – IMMEDIATELY! Near-term fundamentals and mild weather are helping to provide the price resistance we are now enjoying. Natural gas and electricity prices are trading in a range that remains favorable to buyers out to at least 2030. But the medium-to-long term picture is intimidating because natural gas production stagnates at prices below $3 per MMBtu and electricity reserve margins continue to decline (for all the reasons mentioned above).

Taking this all into consideration, now is a near ideal time to hedge (at a minimum) 25% of future gas and electricity costs for the next 3-5 years. Doing so provides partial protection against future price increases while maintaining flexibility should conditions change. A more cautious approach would be to secure a minimum of 50-75% of forward energy supply costs with the goal of converting to 100% fixed energy sometime over the next 18 months.

Hedging strategy and execution require expertise. For those who have that in-house, Transparent Energy can supplement the good work of your team and be your expert procurement arm. For those who don’t, now is an exciting time to become a Transparent Energy customer.

Either way, don’t miss the opportunity we’ve outlined here, as it could be gone soon, and we don’t know when we’ll see long-term prices this attractive again. Contact your Transparent Energy advisor today to find out the best options available for your business.

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To learn more about your opportunities in today’s increasingly complex and volatile energy markets and how online auctions can minimize your energy spend, contact us today at letstalk@TransparentEdge.com. For additional background, see our News & Views section on www.transparentedge.com.

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