Act Now To Avoid A 20-30% Spike In Your Energy CostsJuly 30, 2020
Traditional wisdom says, “buy in the shoulder months,” those times of year before summer’s surge in cooling demand and winter’s 24×7 need for heat drive up energy prices.
However, the times we live in today have changed and are anything but traditional.
A warmer than usual 2019-2020 winter season followed shortly after by the staggering demand destruction of COVID-19 from businesses shutting down or running at half capacity has created a supply and demand imbalance – with energy producers and suppliers left sitting on excess inventory – that has kept natural gas and electricity prices at or near historic lows.
Stated more bluntly, we are in a buyer’s market the likes of which we have never seen before in the history of deregulated energy and which may never be seen again in our lifetimes.
But there is a caveat – the buyer-friendly advantage will likely end soon!
Energy Prices Rocketing Up
In March of this year, Goldman Sachs warned of an upcoming ‘whiplash’ in natural gas prices by year’s end and into 2021 with natural gas prices rocketing higher. Raymond James echoed these sentiments in a June 2020 report by outlining a scenario where natural gas prices nearly doubled year over year. Transparent Energy’s own market analysis points to a similar conclusion – expectations of a “sharp reversal of natural gas prices towards the end of 2020, carrying into the first quarter of 2021 and beyond.”
Rarely has a consensus of market forecasts so clearly delineated the boundaries between a current great time to buy and a future poor one, where the data shows that today’s low prices will take a dramatic turn for the worse in just a few short months, resulting in substantially higher energy costs.
Data Analysis Predicting Energy Price Increases
Natural Gas Settlement prices (chart 1) indicate that July 2020 had the cheapest prices for natural gas in the history of deregulation. In chart 2, the natural gas forward/future prices indicate that prices are expected to settle nearly $0.30 higher (a 20% increase) in just one month! Was July the bottom of the market?
Further, prices are expected to rise every month during the fourth quarter of 2020 through the first quarter of 2021. With electricity prices tightly correlated to natural gas prices (remember, more and more electricity now is being generated by natural-gas-burning power plants), the current data points to a potentially shocking future: businesses that do nothing to manage their energy costs today will wake up to energy supply charges 30-50% higher this winter than what can be secured right now in today’s markets.
Due to the pandemic, many businesses are suffering, so a large jump in energy prices could be devastating. Companies and institutions that wait beyond the third quarter of 2020 to get into a new energy contract will not only lose out on today’s savings, but they also will be faced with paying more for energy than they have in years – a double whammy.
The good news is this all can be avoided. The solution is simple. Consider buying energy now and going long.
The Summer of Energy Procurement
We began this article by highlighting a traditional energy-buying maxim (i.e., it is prudent to wait to buy until the shoulder months) that needs to be shelved for now. One other habit current energy buyers need to kick is waiting until their contract is nearly up before getting back into the market. This is a critical mistake in all times (not just during this crazy COVID-19 world we are currently experiencing).
When you wait until your energy contract is expiring, you force yourself into taking the price the market offers, good or bad. You dramatically reduce your options and buying power.
Again, the good news is it doesn’t have to be this way. The time to secure your energy supply for the next several years is right now, and that is whether you have 3 months, 6 months, 12 months, or even 24 months remaining on your current contract.
The Summer of Energy Procurement is upon us. Natural gas and electricity prices are at or near record lows across the country, so you should get your share of these record prices. These prices will drive massive bottom-line savings for your business today and over the years of your contract. This just may be the financial lift your company needs to survive, or even thrive, during these difficult times.
These savings are rooted in a disciplined, analytical approach and an exacting online auction process, which can be secured with zero risk and zero capital expenditures. Financially speaking, this opportunity is about as good as it gets in all market environments.
At Transparent Energy, we’ve been helping commercial and industrial clients, as well as nonprofits, navigate energy market volatility for over a decade. We’ve enabled our clients to go to market at the most advantageous times and secure the best prices in the market to meet their energy and risk management needs.
Over the course of the last 10 years, we have worked through temporary energy spikes (i.e., the Polar Vortex of 2014) and both favorable and very favorable times of low energy prices. Each time there has been an extremely favorable buying environment, we have rallied around our clients to get them into the market at the right time to secure energy contracts that deliver bottom-line savings to their organization. We have done this through all of 2019 and have continued to do so through 2020 with excellent results.
In all our experience, right now is one of the most favorable markets we have ever seen, and clients have been opting for longer-term contracts than normal. Not long ago, the average term length for an electricity contract was typically in the 24-36 month range; today we are helping clients secure 36, 48, and even 60-month contracts that deliver savings to their bottom lines each and every one of those months.
As a company that rigorously studies the market and transacts on behalf of its clients on a daily basis, we take energy prices seriously. We are studious so we can act fast on your behalf when needed. We feel strongly, based on the data and what we are helping our customers achieve, that the time to buy is now.
The Summer of Energy Procurement is upon us, and the message is clear: Consider buying now, going long, and avoid missing out!
For help evaluating your current energy contract and opportunity for long-term savings, please contact Jonathan Le, Transparent Energy, at email@example.com.
About the Author
Luke McAuliffe is President of Transparent Energy, a leader in online energy procurement. An expert in retail electricity, natural gas, renewables, and demand response sales, and in applying technology and process to extract the best prices from the market, he is an industry veteran with a long record of service excellence. Prior to Transparent Energy, Luke served in senior roles at World Energy Solutions and CPower. He can be contacted at firstname.lastname@example.org.