
How Do You Know You're Capitalizing on Low Energy Prices?
So you’ve heard that natural gas prices are at historic lows, but are you actually taking advantage of them?
First, you should know that, if you are locked into an energy procurement contract at a fixed rate, low electricity prices will not necessarily affect your next bill. That’s why suppliers seek to set up long-term contracts—to protect themselves from price variations and ensure they can charge you at the rates set prior to the agreement.
Secondly, you should know that today’s low prices could mean tomorrow’s savings. It’s not too early to establish terms for your next energy procurement agreement. You don’t need to wait until a provider comes around with a renewal proposal to set up your next agreement. More importantly, you don’t need to just accept the price suggested to you.
With the right tools, you can receive notifications when energy markets reach low prices, and take advantage of temporary opportunities to get the best prices for your long-term agreement.
How Long Will Prices Stay This Low?
While you are able to take advantage of low prices on energy, you’ll have to act fast when the opportunity arises. Prices aren’t expected to stay low for long, and they’ve already started to slowly climb back up.
Unusually warm temperatures this winter brought down demand for natural gas, which is an essential factor in determining energy prices (read our earlier blog post for an in-depth look at all the key factors that drive energy costs). That drop in demand has left natural gas suppliers with excess inventory in their storage reserves, which forces them to reduce prices for natural gas until demand rebounds to the point that it begins to eat away at the excess inventory in the reserves. That’s how prices on the NYMEX prompt month contract reached a 15-year low earlier this month.
Going forward, a warmer-than-usual spring season and the expected spike in temperatures in the summer will drive up demand for electricity—and therefore natural gas. As this growth in demand reduces storage levels, generators can increase their prices for natural gas. And suppliers will make up for the increase in natural gas costs by boosting their electricity prices for customers like you.
How You Can Capitalize
If you can’t renew your procurement contract for another year, for example, you may be wondering how this can affect you.
When you establish your next energy agreement—which can last anywhere from 12 to 36 months—the supplier agrees to provide your energy at the price on the date at which the agreement was set. That means you could be paying for energy at today’s 15-year low prices for the next three years, depending on your agreement.
Waiting to renew until your supplier comes around with a new contract could mean locking yourself in at higher prices just because that’s where the market happened to be at the time you signed the agreement.
How Can I Take Advantage of Future Price Fluctuations?
These kinds of opportunities can arise at any time, but energy procurement is only one part of your job. With all your other responsibilities, you don’t have time to watch the energy markets closely for pricing fluctuations.
That’s where energy procurement tools and services come into play. Energy procurement advisors can keep you up-to-date on opportunities in energy markets, while technology can help you streamline your procurement processes and get the best price.
Purchasing Strategies in the Covid-19 Energy Market
Energy markets have been devastated by COVID-19’s impact on demand.
Energy Procurement Insights for October 2019
Enel X breaks down the latest developments affecting energy prices.
Energy Procurement Insights for August 2019
Enel X breaks down developments affecting energy prices.
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