Winter Is Coming: A Reminder that Weather Remains a Primary Energy Price Driver

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

As a leading energy advisory firm, our team at Transparent Energy is keenly tuned into the fundamental factors influencing global energy markets, with a distinct focus on natural gas, electricity, liquid fuels, and renewables across North America. Throughout the past year, we’ve been regularly sharing our insights on those topics, including:

• Supply/demand balance
• Energy storage
• Capacity markets
• Scarcity pricing
• Technological advancements

Those are all critical topics considered by energy traders, suppliers, and buyers. Another item near the top of any energy discussion is the weather.

What Is the Correlation Between Energy and Weather?

Temperature, atmospheric pressure, humidity, wind shear, cloud cover, and precipitation (or lack thereof) are all hugely important to energy production, distribution and consumption. Historically the highest electric usage days occur during the summer when the thermometer is into triple digits. Conversely, natural gas consumption reaches its yearly apex as a source of heating in winter. Below is a chart comparing the seasonality of both commodities:

Source: EIA

The blue line represents monthly terawatt-hours (TWh) generated nationally, while the orange line shows monthly U.S. natural gas consumption in billion cubic feet (Bcf). An interesting takeaway is that, in recent years, we’ve seen sharply higher power demand in the winter months in addition to its annual summer dominance. This development is expected to continue as more of the residential and commercial heating sector is electrified. The trendlines are also expected to take an upward turn, as total U.S. energy consumption and exportation is set to explode during the second half of the 2020s.

How Does This Affect My Energy Rate?

Customers exposed to index or basis prices this winter face tremendous price uncertainty. Countless budgets were thrown into chaos by the polar vortex of 2014 and the deep freeze that gripped wide swaths of the country in 2019. In both instances natural gas prices exceeded $100 per MMBtu for several days. Even a short blast can cause huge financial damage to an unprepared business.

In 2021, winter storm Uri sent energy prices soaring across North America. ERCOT wholesale power prices averaged $1.50 per kWh for the entire month of February (a more than 4,000% increase! – the other 11 months of the year averaged $0.035 per kWh), leaving the annual average rate at $0.159 per kWh.

Even for businesses that are fully hedged for the upcoming winter, it is still essential to pay attention and plan accordingly. Freezing weather and high energy use leads to a draw-down in natural gas reserves. Following consecutive warm winters in ‘22/’23 and ‘23/’24, U.S. gas inventories reached a +41% surplus vs. the 5-year average. By the end of the much colder ’24/’25 winter, that surplus was transformed to a deficit -12%. In one year, prompt month gas prices had moved from $1.659 per MMBtu to $3.914, a more than 135% increase.

So Weather IS Critical to Energy Prices. What’s in the Forecast?

Fortunately, market conditions appear favorable ahead of winter as inventories have reached 3,960 Bcf (a +4.5% surplus) and natural gas production is approaching record levels near 109 Bcf per day. Projections for the balance of November call for above-normal temperatures across the eastern two thirds of the country. Weather forecasts beyond a two-week period are notoriously unreliable.

Meteorologists are pointing towards a weak to moderate La Niña emerging, which is generally associated with colder/wetter conditions in the northern states, warmer/drier occurrences across the southern half of the country, and higher-than-normal variability.

Consensus among the experts we’ve polled point to expected mild conditions across California and the Southwest into Texas with the possibility of brief cold spells. More often than not, forecasters are leaning towards a cold, snowy winter in the Midwest that should bleed into the MidAtlantic states for an unknown duration. New York and New England may see average to slightly warmer temperatures – which even in the best conditions means plenty of sub-freezing weeks and mounds of snow. Below is a recent winter outlook from The Weather Channel:

How Should My Business Prepare for the Upcoming Winter?

Given all we know – and all that we don’t – the key step you can take is to establish a long-term energy procurement strategy. Climate and weather are impossible to predict. Even the most successful weather derivative traders typically profit from short-term or highly localized insights. The best and safest bet for your company is to prepare for the unknown and utilize a comprehensive approach to purchasing. Unless the possibility of an extremely high energy bill is palatable, we’d recommend an immediate partial hedge – i.e., converting a percentage of future energy consumption to a fixed rate – for the upcoming winter at a minimum. Over time your Transparent Energy advisor will collaborate with you to schedule purchases in advance and capture price dips months or years ahead of the weather.

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For help developing a long-term energy procurement strategy that minimizes your energy spend and reduces your risk exposure, contact Transparent Energy at LetsTalk@transparentedge.com.

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