Energy Market Sees High Prices Across the Board
Posted on June 18, 2008 by oregoncub
Tags, Climate and Conservation, Utility Regulation
It’s summer (almost) and the natural gas furnaces around Oregon have been idling (almost) as temperatures reach (almost) 70 degrees on a regular basis. Normally, Oregon’s largest natural gas provider, NW Natural, would be purchasing gas to store for the winter. As stated by Bloomberg.com, “Utilities and large industrial consumers typically stockpile gas during the U.S. summer for use during the peak winter demand period.” But across the nation, gas utilities are buying and storing less gas than normal, because the cost of natural gas is not at a normal level.
Everyone knows that the price of oil (recently at nearly $140/barrel) and the price of gasoline ($4 and up) have been rising quickly. But a look at the wholesale natural gas market shows how much the price of natural gas has also increased.
One year ago, in June 2007, the price for natural gas was $7.30/mmBtu; today the price for that same volume of natural gas is $12.86. For historical perspective, here’s a look at those and other recent years:
* 2008 (June) $12.86
* 2007 (June) $7.30
* 2006 (June) $5.79
* 2002 (June) $3.05
* 2001 (January) $9.61
* 2000 (June) $3.89
* 1999 (June) $2.13
As you can see, the upward pressure on natural gas prices over the last decade has been a clear pattern, increasing 600% since 1999, with an 80% just in the past 12 months. Unusual events provide bumps in the pattern; for example, in January 2001, the West Coast was reeling under the effects of the Western Power Crisis. That we are seeing natural gas prices significantly higher than those we saw at the height of the Power Crisis, that they are instead comparable to the prices we saw in the aftermath of Hurricane Katrina ($11.95 in October 2005), is something to sit up and take notice of.
We see two real issues which make us sit up and take notice: the lack of natural gas storage (down 15% percent from this time last year); and the concurrent rise in wholesale prices. The prices of the wholesale market have not yet made it into retail rates, but customers of NW Natural, Avista, Cascade, and other gas utilities will begin to see those higher fuel costs on their own bills this fall and winter.
Of course, natural gas is also a source for some electricity (four gas combustion plants operate in Oregon), and therefore also affects prices in the electricity wholesale market. So how’s electricity doing now? Well, looking at the wholesale “day ahead” market, we see prices quite a bit higher than what we would expect for this time of year. West Coast on-peak price is currently about $135.00/MWh. That is significantly more than we are seeing in our wholesale rates here in the Pacific Northwest, where spring runoff in combination with the hydropower system has kept the price per MWh down to $67.00, but even that is higher than normal for the NW in spring. Our prices will edge upward in July and August as the runoff ends. Again, for a historical comparison, this time with electricity prices (from the Mid-C trading hub):
* 2008 (June) $67.00
* 2007 (June) $55.98
* 2006 (June) $32.30
* 2001 (June) $87.00
* 2001 (May) $450.00
As you can see from the large fluctuations in 2001, the Western Power Crisis caused huge increases and volatility in the electricity wholesale market. For customers in California, who were sold a bill of goods called “deregulation,” this meant terrible times in paying those electricity bills. CUB led the fight to keep Enron from deregulating the Oregon market, so we are not in danger of volatility quite that massive.
However… Energy prices are going up. They are going up in a big way and pretty much across the board: crude oil, gasoline, natural gas, and electricity. Customers need to be prepared so that when those increases from the wholesale market start to show up in their retail rates this fall and winter, they are not totally taken by surprise.
One way Oregon residential customers can insulate themselves (pun intended) from the effects of these cost increases is to call the Energy Trust of Oregon and set up an energy audit for their home. Energy audit providers get super-busy when a new rate increase goes into effect, or when it gets cold and their heating bill goes up. Now would be a great time for you to call to set up your audit, and beat the rush. Find out how you could improve your own energy efficiency, and what financial assistance and tax credits might be available to help make it possible.
The real beauty of the Energy Trust energy audits is that for every home or business which is able to improve energy efficiency, the demand on the energy system as a whole goes down, which reduces the price, and the environmental consequences of our energy use, for everyone.
CUB cannot keep energy prices from increasing. We can and will work to demand that utilities be mindful of the effect that these cost increases have on customers, and that utilities keep costs as low as possible by putting off any discretionary spending (such as the 130 new employees listed in PGE’s current rate case). Just because utilities are monopolies does not mean they can disregard a basic tenet of good business: that the business owner try to lower some costs when other costs go up.
CUB will minimize the increases to the extent that we can, and we are asking our members to also do what they can to reduce their own energy usage. Energy costs overall are going up regardless. We would do well to make it as easy on ourselves as possible.
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03/10/17 | 0 Comments | Energy Market Sees High Prices Across the Board