Market Updates

One of the biggest impacts on Natural Gas prices is speculation by financial firms. This is the OTC market...Over the Counter transactions for natural gas futures contracts. Although futures exchanges place limits and accountability levels on trading today, they don't enforce them. Thus the CFTC is now looking at applying position limits consistently across all markets, equally...to include NG futures. This would, in theory, keep large funds from "pushing" the market.

PPL Territory (PA)
Caps come off January 2010. Metropolitan Edison, PECO (Philly) Energy, Pennsylvania Electric, and Allegheny Power remove then at the end of 2010. The PUC is estimating the prices in PPL for commercial customers to rise over 15% and 16% for industrial customers. In addition, they expect prices to rise significantly in all of the other markets (with the exception, currently, of PECO).

How active is the Illinois market?
According to a recent report by the Illinois Commerce Commission, only 24% of the small commercial customers have switched to a competitive retailer, 67% of medium commercial, and 90% of large commercial. This trend follows that of many other competitive markets, such as Texas.

New Jersey Market
New Jersey has seen a shift "down market" in terms of recent price increases to the standard rate commercial customer. For the first time, customers without IDR meters, now have an opportunity for significant savings in the PSE&G and JCPL territories. Estimates range from $.005/kWh to $.015/kWh.

Finally, electricity prices....
The assumption has been that demand support would return, NG would match oil in volatility, etc. This has not been the case and that doesn't appear to be changing any time soon. Many analyst don't expect demand pressure until late 4th quarter or early 1st quarter of 2010. Although rigs have shut-in, NG storage is at record levels and demand is week. Even this past week when the storage injection numbers came in below expectations, the price only bumped slightly and then dropped....and kept dropping. As I stated in previous blogs, NG should bump around at record lows for the next few months.

All the best and thanks for reading!
Scott

Wall Street Journal Article on the Death of Solar in TX

(THIS IS A COPY)....and VERY BAD NEWS, in my opinion.

The sun isn’t shining in Texas this morning.

Is Texas afraid of the sun demon?

A bill in the Texas legislature to create a $500 million rebate program for utility-scale and small-scale solar installations – and jumpstart a Texas solar industry – died late on Friday night on a procedural maneuver. Several people who followed the bill closely said it wasn’t voted down on the merits. It was derailed on a picayune legislative point about whether two bills should be melded together. The point, raised by Houston Democrat Sylvester Turner, was turned away, but by then it was too late. The clock had run out. In all likelihood, this means the Lone Star State won’t be able to create any solar incentives until 2011.

Solar boosters are worried about the message this will send. “We will lose out on talent and manufacturing because the industry will either not locate in Texas or relocate to other states that have legislative support,” says Raymond Walker, general counsel of Standard Renewable Energy, a Houston company that installs solar panels for homes and businesses.

The death of the bill was unexpected because it had strong support on both sides of the aisle – from rural Republicans such as bill sponsor Sen. Troy Fraser who saw the economic uplift created by wind farms in West Texas to urban Democrats would were in favor the idea of boosting solar-installation jobs. The fate of the bill is also surprising because Texas’ effort several years ago to create a wind industry has been so successful.

Still, despite the darkness that has descended on solar’s Texas backers, some say there is reason to be positive. “What is interesting and what matters to us is that the chair of the Texas Business & Commerce Committee (Sen. Fraser) was the first person to introduce a solar bill,” says Kari Smith, public affairs director for solar manufacturer SunPower Corp.

“It is not business as usual in Texas anymore. We’ve gone beyond this is environmental versus big business issue,” says Ms. Smith, pointing out that the bill had support from an ad-hoc coalition called Texas High-Tech for Solar and included Advanced Micro Devices Inc., Texas Instruments Inc., Hewlett-Packard Co. and General Electric Co.

Proving her point, Jim Marston, head the state chapter of Environmental Defense, bemoaned the death of the solar bill thusly: “We are going to lose a bunch of jobs to other states. We are going to lose all those installation jobs, the kind of jobs that cannot be exported to China and India. And we’re not going to get the clean-air benefit.”

“This was simply bad luck,” says Steve Taylor, a member of the Solar Alliance and executive with Applied Material Inc. “Circumstances and procedural motions.” He said solar boosters will meet soon to discuss ways forward, pointing out that the bill passed the state senate on a 26-4 vote.

The $500 million would have been funded by a statewide charge of electricity bills.

This is very unfortunate for Texans.

Scott

Quick updates on issues that you might find of interest!

East Texas NOT to deregulate.

It looks as though two bills aimed at getting Entergy involved in the deregulated Texas energy markets is going to fail...again. They have tried, unsuccessfully, to join the likes of those in the Oncor and Centerpoint services territories who have competitive energy markets, since 2002. 

Carbon Cap and Trade expected to raise energy rates by roughly 8%.

According to a recent study by the Pew Industry on carbon ( CO2 ) Cap and Trade legislation, manufacturing could see electricity rates increase by approximately 8%. This is not likely to take effect until 2012 and could change based on final carbon legislation and the effects on the utility industry.

Solar in TX

On May 26, 2009, HB 545 passed the TX State Senate. This bill will provide $500 million dollars in solar incentives in the state. This means that solar in TX is about to become a viable residential and commercial option. More details to follow.

All the best,

Scott

Natural Gas Prices Rising?

Last week I heard over and over again, "that's it, prices are going to keep going up"! Summer is around the corner and that means prices are going up. In the past, this may have been true...but this is not the past.

We have strong economic factors at play, demand destruction, and a weak hurricane forecast. This all adds up to uncertainty on when the market will start climbing again for any sustained amount of time. That being said, natural gas is up ~$1/mmbtu since the end of April. Of course, the economic news has been strengthening the markets as well....lower than expected unemployment rates, real estate rebounding in certain markets, etc. So, have we seen the bottom of the market?

Not sure that it actually even matters. If you look at the history of natural gas performance you'll see ups and downs in the chart....it looks a bit like a mountain range with very big peaks and very deep valleys...but we are definitely in a VERY deep valley at the moment. Prices haven't been this low in years. The bottom is relative...especially when you look at the 20 day moving average of the 12 month gas strip. It basically shows that if you are signing an energy contract while gas is under $8/mmbtu then you are beating the rolling average for the past several years. That is a GOOD thing when you consider how volatile the market swings really are.

So, I guess it comes down to what you think that your risk profile is. If you you like things closer to the center then locking now might make a lot of sense. If you like a bit more risk (and can tolerate it) then maybe you stay on a variable rate product and see what happens. Finally, if you don't like taking risk and you like beating the odds (and that is good enough rational) then sign now and take out several years because you have history on your side!

Whatever your current stance on the market, it is hard to argue that rates are low...unexpectedly low.

Strip	Last Close (5/11/2009)	1 Week Prior (5/4/2009)	1 Month Prior (4/9/2009)	Last Year (5/9/2008)	2 Years Ago (5/11/2007)	3 Years Ago (5/11/2006)
3	4.418	3.827	3.752	11.691	8.046	6.919
3	4.418	3.827	3.796	11.691	8.046	6.919
6	4.639	4.086	3.933	11.783	8.279	7.648
6	4.639	4.086	3.975	11.783	8.279	7.648
12	5.412	4.899	4.737	11.776	8.804	9.113
18	5.77	5.292	5.081	11.349	8.737	9.281
24	6.119	5.676
36	6.492	6.123

All the best
Scott

Connecticut Retail Energy Market in Jeopardy

Yesterday in Hartford, CT, the state House voted in favor of restructuring the electricity market in Connecticut. The Senate is up next but the opposition to the bill is stiff and it will be a tough battle to get the billed passed. 

The argument to re-regulate is based on the assumption that if consumers return to the two utilities, they will see a more stable wholesale market and bills will be reduced by ~5% or more. Connecticut has been deregulated since 1998 but switching has been slow and the market has taken a long time to mature. 

"This will put all customers back into the hands of the utilities." Albert Carbone, spokesman for United Illuminating Co., which has 324,000 customers in southwestern Connecticut, said the bill might reduce risk in acquiring power.

"If you eliminate retail choice for small customers it may reduce the risk, but we don't know by how much," Carbone said in a phone interview. "We've always said we wanted more flexibility in procurement process to get lower prices for our

contracts."

Rep. Sean J. Williams, R-Watertown, ranking member of the Energy Committee, said during the House debate that without the support of Sen. John Fonfara, D-Hartford, the Senate co-chairman of the committee, the bill's chances are slim for passage before June 3, the end of the legislative session. Fonfara rejected the legislation in committee, so Nardello, with support from House leadership, offered it Wednesday as an amendment to a related bill. Backer, in an interview after he voted against the bill, said he is skeptical that it could create consumer

savings.

Energy in 09 and Market Updates

Will electricity and natural gas prices rise or decrease in 09? How about in 2010? The EIA expects that 09 and 2010 will show increases (unless the economic recovery is slower than expected). They base this on several factors:

• NG is becoming increasingly competitive with coal in the electricity sector thus they expect to see increased usage of the fuel.
  
• Coal generation is expected to sink by 3.2% this year while NG increases by 1.6%
• NG production will shrink in 09 as well based on the number of rig counts going down
• 5% year-over-year decrease in the number of cooling days ( days in which cooling is required) is expected this summer

• Usage is down and cost are spread over a smaller number of kilowatt hours, thus higher rate

So, does that mean that prices are going up...for sure? No. The economy has a HUGE role in the direction in which prices will head.
Risk vs. Reward is always the question. How much risk for how much reward? Right now prices are historically very low...that fact cannot be ignored.

Market Updates:

Illinois- we continue to see great savings opportunities for both electricity and natural gas in the ComEd and Ameren territories in Illinois. The market has been extremely active in 2009.

Michigan- the natural gas market in Michigan is growing. According to Restructuring Today, Consumers Energy, Consolidated Energy, and Semco Energy Gas are all showing increases in shopping rates in 2008. That is good news for a market that is suffering mightily in this economy.

Pennsylvania- although shopping numbers dropped in 2008, the total load increased by 268 MWs. That reflects the increased commercial shopping, particularly in Penn Power and Duquesne Power.

Have a great day!

University of Colorado Hurricane Forecast for 09

Usually being average or below average isn't necessarily such a good thing. In the case of hurricane reports though, tending on the average to below average side of things is good. Especially if you are in the camp of those who would like to see Natural Gas prices stay low. If you are wondering who is in that camp...if you are an energy purchaser (NG or Electricity) then you are in that camp.

According to the University of Colorado's annual spring hurricane report put out by Dr. Gray and his team:

The forecast calls for 12 named storms, which includes six hurricanes. Of those six, two are expected to develop into major hurricanes (Category 3, 4 or 5) with maximum wind speeds of 111 mph or greater.

"Based on our latest forecast, the probability of a major hurricane making landfall along the U.S. coastline is 54%, compared with the last-century average of 52%," said lead forecaster Phil Klotzbach of the Colorado State team.

The hurricane season officially begins on June 1 and runs through October.

By the way, this is actually big news. Why? Normally the summer and fall prices will begin to move upward immediately following an above average hurricane forecast. Speculators will push the market based on the chance to profit on potential damage to NG rigs in the Gulf of Mexico. The weaker the forecast for hurricanes the less speculation.

By the way, the market is slightly down today.

All the best!