Plugging into Multifamily - The Official Blog of AUM

Energy Outlook - February 2015

Posted by Alison Hoss on Thu, Feb 12, 2015 @ 10:30 AM

Feb_1

Feb_2

Back to Normal Levels - Within 1% of 5-Year Average

EIA’s latest Storage Report measured storage levels at 2,428 BCF, a whopping 468 BCF above the same period in 2014.  Remarkably, this is climbing to within 1% of the 5-year average level of 2,457 BCF and 24% above last years’ levels.  Despite the severe snow storms the Midwest and Northeast experienced, moderate temperatures dampened gas withdrawals from working supply. Storage levels in all three regions (East, West and Producing regions) were above their year-ago levels by 254 BCF, 66 BCF, and 148 BCF, respectively.

Feb_3

Weather Forecast: Mild Temperatures for the Remainder of Winter

Temperature Outlook

The past few weeks brought record snowfall in the Northeast and Midwest and prices continued to fall. February looks to bring below average temperatures to the middle of the country and above average temps west of the Rockies.  The 3-month forecast continues to show above average temps west of the Rockies with the regions seeing below average temps shrinking to parts of Texas, Oklahoma, and the Central Plains.  The East Coast forecast looks to see normal temperatures throughout the remainder of winter.

Feb_4

Energy Prices 

Natural Gas

This week Natural Gas prices fell to a new 32-month low, settling at $2.584/MMBtu.  With predictions of lower than expected gas withdrawals, natural gas prices continue to drop.  Storage levels have not experienced large withdrawals and edge closer to matching the 5-year average.  The temperature outlook for the remainder of winter looks to be at or above normal temps (except for Texas and the Central Plains).  All indicators point to prices staying low. 

Today’s early prices for March 2015 continued trading at the $2.59 level, while March Crude Oil is up at $52.23/barrel and heating oil is up 2.24% to $1.809/gallon.  The gas strip prices for 2016 through 2021 all closed at all-time lows yesterday.  Gas supply helped to drive prices down.  While domestic production remained relatively flat, imports from Canada were up 2.9% last week with increased imports to the Northeast and Midwest.

Feb_5

Feb_6 

Electricity

The U.S average retail price of electricity came in at 10.35 ¢/kWH in January down from the prior month of 10.80 ¢/kWH. As natural gas prices go, so goes electricity prices.  The largest change in electric rates came from significant hikes in utility default service rates; especially in the Northeast and Midwest.

Bottom Line

Winter is at the Half-Way Point and We're Way Ahead of Last Year

Continued mild temperatures (not snowfall) and increased working gas in storage drove natural gas prices down to 32-month historic lows. Average to above average temperatures predicted for most of the country for the remainder of winter bodes well for continued stable and low natural gas prices.  Similar to gas, electric prices have shown a drop in prices.

 

 

Why_AUM

Founded in 1994,  AUM provides the most complete utility management solution to multifamily. For a no-obligation NOI Analysis and Program Plan that demonstrates what AUM can do to help your bottom line, click the button here.

  No-Obligation NOI Analysis

 

 

Tags: Energy cost, Energy consumption, Energy Commodity Purchasing, Energy services, Energy Efficiency

Energy Commodity Purchasing Outlook - November, 2014

Posted by Alison Hoss on Fri, Nov 07, 2014 @ 03:11 PM

11-7-2014_11-40-43_AM

natural_Gas_Buyers_Guide

11-7-2014_11-41-41_AM

 

Injection Season is Over – Stockpiles Higher than Expected

The traditional Injection Season has ended and gas storage levels saw a healthy jump in October, up 583 BCF.  Some experts still expect a couple more weeks of storage injections through the middle of November. This past April, storage levels were 55% below the five-year average and no one expected injection levels to get  anywhere close to those historic levels.  But strong injections through the summer lifted stockpiles to within 6% of the five-year level.  The robust injection season has alleviated some of the supply concerns going into this winter season. 

A word of caution, colder temperatures are predicted for the first half of November, which could result in gas constraints or possible withdrawals in November.

11-7-2014_11-44-04_AM

Weather Forecast

Near Term Unseasonably Cold Temps – Overall, Not a Rosy Picture

Northeast & Mid-Atlantic: Repeat of Last Year?

Forecasts indicate similar cold and snow to last winter.  Expect cold surges in November, with Polar Vortex temperatures hitting in January and February.  Higher than normal snowfalls are predicted west of the I-95 corridor.

11-7-2014_11-47-04_AM

Southeast, Gulf States & Tennessee Valley: Concerns over Rain & Ice.

Expect extreme ice events from Texas to eastern Kentucky in January through early February. A very wet winter is predicted with possible risk of flooding from large storm systems. The current weather pattern sets up Florida for significant and severe weather potential in mid- to late winter.  Tornadoes will be possible from mid-January to February.

Midwest, Ohio Valley, Northern & Central Plains: Dry & Less Harsh.

Expect several cold months for the Midwest, although not as extreme as last winter.  Below-normal snow fall totals are predicted.  The Northern and Central Plains are expected to see temperatures on a roller-coaster; up and down all winter; lessening risk of high total snowfalls.

Northwest & Northern California: Some Precipitation, but Not Enough to End the Drought

California has seen its fourth year of drought and is in dire need of precipitation.  In California, the Northern Sierra and Sierra Nevada, rainfall is predicted to be below normal.  December will bring some rain to northern California, but eases off in the following months, making the region drier than normal by February.  After a season of intense wildfires, the precipitation that reaches the Northwest will not be enough to prevent problems next year.  Southern California looks to see slightly above-normal precipitation this season, especially in areas farther from the coast.

Southwest & Southern Plains: West & Rainy; Possible High Snowfalls

A weak El Nino may bring high rains to the Southwest.  The Four-Corner region, as well as Northwest Texas, Oklahoma and Kansas, may get above-normal snowfall totals.

 OVERALL: Weather is NOT expected to be friendly to energy prices this winter.

11-7-2014_11-48-22_AM

What is the Polar Vortex?11-7-2014_11-49-45_AM

A polar vortex is a persistent, large-scale cyclone located near either of earth’s geographical poles.  The polar vortices are located in the middle and upper troposphere and the stratosphere. On occasion, the cyclone slip down away from the North Pole and brings with it frigid temperatures and “Polar” conditions.

Energy Prices

Prices Climb for 7th Day in a Row

For the 7th day in a row, natural gas spot prices for December have risen; as high as $4.315 per MMBTU. NYMEX Futures prices traded as high as $4.325 per MMBTU.  October trading began at $4.003/MMBTU. Despite positive storage reports, the forecast of cold weather have driven prices up.  Bullish speculators are betting on the cold winter weather to increase early-winter demand for heating fuel.  Analysts are concerned if we get a repeat of last winter, storage supplies will dry-up quickly. In addition, the pipeline bottlenecks from last year have not been corrected, resulting in constraints on gas deliveries and price spikes if storage levels drop significantly.

11-7-2014_11-52-58_AM

Bottom Line

Predictions of Another Harsh Winter Have Driven prices Up.

Even when we get good news from a solid natural gas injection season, prices still climb.  Mother Nature has spoken again and her threat of bad weather has started November off with a significant price spike of over 30¢ per MMBTU in the last 30 days.

Congrats to those who locked in prices in October!  The early November cold spell has driven prices up.  We suggest you quickly lock-in prices before temperature  forecasts get worse. By the way, we have seen predictions of gas storage WITHDRAWALS in November. It’s way too early to start removing significant gas from storage.

A quick note for our New England Clients; electric default pricing for the upcoming winter months is topping $0.20 per kWh in many jurisdictions, forecasts of 20-30% year over year increases in electric costs have flooded the market.  There is still time to lock in lower rates for a December contract start but the window is getting smaller.

 natural_Gas_Buyers_Guide

Tags: Energy cost, Utility expense Management, Energy consumption, Energy budgeting, Utility rate schedules, Multifamily, Energy Commodity Purchasing, Cost cutting

Energy Commodity Procurement Outlook - October

Posted by Alison Hoss on Thu, Oct 02, 2014 @ 02:02 PM

 Energy_Outlook_Oct_1

Energy_Outlook_Oct_2

Storage Injections Grew; but May not Reach Historic Levels

Gas Storage levels continued to grow at strong levels.  But the injection season is coming to an end.  With only 4 weeks remaining, it will be a challenge to climb back to last year’s storage levels or the 5-year average storage levels.  In order to fill the caverns and reach the 3,400 Bcf level, we need to see weekly injection levels of over 82 Bcf for the remainder of October.  Record high production and continued mild weather contributed to the strong injections in September.

 Energy_Outlook_Oct_3

Weather Forecast : Above Average Temperatures for Most of the Country

Temperature Outlook

For the Lower 48 States, the three month forecast predicts above normal temperatures.  Only New Mexico and western Texas are predicted to see below average temps. In October, both coasts are expected to experience above normal temperatures, with only the upper Midwest to see below normal temperatures.

Weather for October does not appear to be a major factor in energy prices.  Based on weather predictions alone, energy prices should remain flat through October.  However, November is the beginning of winter and when the markets will begin reflect increased weather volatility.  While weather is predicted to be above normal in November and December, the markets will likely react sharply to weather changes; let’s not forget how quickly the market changed on last years’ December weather.

Don’t wait until November to lock in this winter’s natural gas prices.  Market adjustments to weather changes may be swift and sharp.  

 Energy_Outlook_Oct_4

EC-Equal Chance for A.N.B.      A- Above      N- Normal     B - Below

Courtesy: NOAA

Energy Prices

September Natural Gas Prices Up Only 14 Cents; the Same for October

September Natural Gas 12-month strip prices began at $3.823/MMBTU and ended at $3.957/MMBTU with a few ups and downs along the way.  October trading began at $4.003/MMBTU. Factors contributing to the bearish outlook are all-time high gas production, above normal storage injections and mild temperatures.  Optimism is dampened with the larger remaining storage deficit and all-time high exports to Mexico.  Overall these factors look to balance each other and analysts predict normal prices for October.

Energy_Outlook_Oct_6

As winter approaches, it brings the cold temps and also price volatility.  The EIA’s chart below looks at Implied Volatility (IV) vs. Actual Volatility.  Implied Volatility helps analysts calculate the probability of market movement.  In general, IV increases when the market is bearish and decreases when the market is bullish.  The common belief is that bearish markets are more risky than bullish markets.  The chart below is a reminder of last winter’s market volatility. As a reminder, natural gas prices rose 26% from November 2013 to March 2014.

Energy_Outlook_Oct_7

Bottom Line: Short-Term Natural Gas Prices Remain Flat - Let's Not Forget Last Winter

It’s October and winter is just a few weeks away.  The good news is the predicted above normal temperatures should keep gas prices stable in October.  The concerning news is that November is coming, along with it the normal colder weather, but also potential for having storage levels under the 5-year average. If we experience colder than expected temperatures in November, energy markets could start to take off. 

Per EIA, Henry Hub natural gas spot prices averaged $3.73/MMBTU in 2013, and are expected to average $4.46 in 2014 and $3.87 in 2015.

October is a great time to lock in this winter’s gas prices.  Waiting is the risky option.

 

 

About The Author

Dimitris Kapsis joined AUM in 2008, and is responsible for the creation and management of the Energy Solutions group. His leadership had allowed AUM to expand its offerings and become a leading national energy management services provider for the Multifamily industry. These Energy Management solutions are inclusive of energy management planning, facility utility auditing, energy commodity procurement, utility variance analysis, rate & tariff analysis, budgeting and benchmarking in addition to AUM’s traditional Invoice Processing, Resident Services, and Utility Submetering services.

In addition to his responsibilities at AUM, Dimitris is active in the Association of Energy Engineers (AEE) and the American Society of Heating, Refrigerating and Air-Conditioning (ASHRAE). He also holds several professional certifications, including Certified Energy Manager (CEM®) and Certified Energy Procurement Professional (CEP®). He is a frequent speaker on Energy Management in Multifamily including:

• Guest Lecturer at Georgia Tech’s School of Building Construction
National Apartment Association
NMHC Leadership Conference
• EPA Panel Speaker on Energy Star

Dimitris is an advisor to the EPA’s development of a Multifamily benchmarking standards, and a member of the Data Taxonomy Think Group lead by Fannie Mae, the EPA and funded by the MacArthur Foundation. He received his B.S., Urban Systems Engineering in 1993, and his M.S., Facilities Management in 1997 from George Mason University.

Tags: Energy cost, Utility expense Management, Energy consumption, Energy budgeting, Utility rate schedules, Multifamily, Energy Commodity Purchasing, Cost cutting

Multifamily Market Alert - EPA Announces 1-100 ENERGY STAR Score for Multifamily

Posted by Alison Hoss on Tue, Sep 16, 2014 @ 03:01 PM

 

Multifamily Market Alert

EPA Announces 1-100 ENERGY STAR Score for Multifamily

Today, the Environmental Protection Agency (EPA)  announced the availability of its 1-100 ENERGY STAR score for Multifamily. For two years, EPA has been analyzing energy data received from the Fannie Mae Multifamily Survey and Data Taxonomy Project. Available through ENERGY STAR Portfolio Manager®, the score enables owners and managers to compare energy performance of their properties against similar properties nationwide.  It provides valuable information to help prioritize energy efficiency efforts and track improvements. 

AUM Chief Energy Officer Dimitris Kapsis was actively involved in the development of the benchmarks, and the score is an important development in the future of Multifamily energy management.  

As an ENERGY STAR Partner, AUM works on your behalf to ensure that both property characteristics data and energy usage data needed to deliver a score are correctly input into Portfolio Manager.  We will continue collaborating with EPA to make sure the new tool is an effective measure of your energy usage.

 

 

Why AUM?
Founded in 1994, AUM is celebrating its 20th anniversary of increasing Multifamily property NOI & RE value through use of its integrated Resident Billing & Energy/Utility Management tools. 

For a no-obligation NOI Analysis & Program Plan that demonstrates what AUM can do to help your bottom line, click below.

No-Obligation NOI Analysis

To learn more about our services click below

AUM Services Overview

 

Tags: Energy consumption, Multifamily, Energy Efficiency, ENERGY STAR, Benchmarking, EPA, Environmental Protection Agency, Portfolio Manager, Fannie Mae

Energy Commodity Procurement Outlook - September

Posted by Dimitris Kapsis on Thu, Sep 04, 2014 @ 02:55 PM

 1

Natural Gas Storage

2

Storage Injections Grow, but Miss Market Expectations

US Natural Gas Storage levels continued to grow, but the markets expected more and as a result, natural gas prices bumped up a few cents per Bcf on the NYMEX.  The East and West natural gas regions both saw storage builds larger than their 5-year average (12 BCF and 6 BCF above 5-year average, respectively), while the Production Region experienced a 2 BCF drop below in storage injections. 

While storage levels are increasing, the average unit cost of the gas in storage is $4.38.MMBtu, 15% higher than this period last year.  Reasons for concern: only 9 weeks left in the injection season, lower than expected gas storage levels, the effects of recent warm weather, and higher priced cost of stored gas; these factors do not bode well for the price of this winter’s gas coming out of storage.

 3

Weather Forecast : Temperatures Less of a Factor

Temperature Outlook

As the summer comes to an end, weather is becoming less of a price factor over the shoulder months of October and November.  The end-of-August hot spell did have some impact on storage injections, however traders do not expect near-term warm temperatures to sway prices. 

The temperature outlook for September through November indicates above-normal temperatures in the West and almost the entire Eastern coastline.  Below average temperatures may be felt in the central area of the Great Plains.

Near term weather concerns are trending towards possible tropical storms and hurricanes, which could disrupt oil and gas rigs and production in the Gulf of Mexico.

 4

EC-Equal Chance for A.N.B.      A- Above      N- Normal     B - Below

Courtesy: NOAA

Energy Prices

Natural Gas Prices Continued to Move Up as August Ends

The warmer temperatures during the end of August and an underwhelming gas storage report caused natural gas prices to move up at most market locations.  NYMEX 12-month prices increased 1.7%, closing the month at 40.35¢/therm.  Likewise, the 12-month PJM electricity prices rose 1.3%.  Henry Hub gas prices rose 14¢/MMBtu in the last week of August.  September futures contracts rose from $3.823/MMBtu to $3.957/MMBtu, before the contract expired.  The October prompt month started trading up at $4.003/MMBtu.

Regional Pricing of Note: Northeast Prices Show Wide Fluctuations 

The major Northeast market areas saw prices trade with strong discounts to the Henry Hub since the spring. At Transcontinental Pipeline's Zone 6 (serving New York), prices began the last week of August at $2.37/MMBtu, fell to $1.86/MMBtu (the lowest level since December 1998), and ended the week up at $2.79/MMBtu. At the Algonquin Citygate (serving Boston), prices rose from $2.46/MMBtu to $4.23/MMBtu, and then fell to $2.92. 

The Midwest and West saw prices increase. Chicago, rose 8¢ to $4.01/MMBtu, and Northern California prices increased to $4.56/MMBtu.

Also hampering gas prices is the low number of active rigs (330), down 57 units from last year.  The chart below indicates gas spot price increases the last few years as the rig counts decline.  Fortunately, fracturing and horizontal drilling have provided significant volumes of gas to offset the lower rig counts.

5

Bottom Line: Get Ready for Winter Pricing

Labor Day has passed, summer is over and the end of gas injections season is nearing.  The good news is that gas production is up; thanks to fracturing and horizontal drilling.  But with less than two months of gas injections left, it will be difficult to get back to our 5-year average storage levels.  Prices will be challenged if another cold winter hits us.  Low storage levels, higher priced gas in storage and no increase in available pipeline capacity could result in the perfect storm for this winter’s prices.  This Fall’s pricing will be mainly driven by near-term weather forecasts (primarily tropical storms) and storage reports.

Now is a good time to start locking in your winter gas; at least a portion of it to mitigate potential winter price risk.

 

 

About The Author

Dimitris Kapsis joined AUM in 2008, and is responsible for the creation and management of the Energy Solutions group. His leadership had allowed AUM to expand its offerings and become a leading national energy management services provider for the Multifamily industry. These Energy Management solutions are inclusive of energy management planning, facility utility auditing, energy commodity procurement, utility variance analysis, rate & tariff analysis, budgeting and benchmarking in addition to AUM’s traditional Invoice Processing, Resident Services, and Utility Submetering services.

In addition to his responsibilities at AUM, Dimitris is active in the Association of Energy Engineers (AEE) and the American Society of Heating, Refrigerating and Air-Conditioning (ASHRAE). He also holds several professional certifications, including Certified Energy Manager (CEM®) and Certified Energy Procurement Professional (CEP®). He is a frequent speaker on Energy Management in Multifamily including:

• Guest Lecturer at Georgia Tech’s School of Building Construction
National Apartment Association
NMHC Leadership Conference
• EPA Panel Speaker on Energy Star

Dimitris is an advisor to the EPA’s development of a Multifamily benchmarking standards, and a member of the Data Taxonomy Think Group lead by Fannie Mae, the EPA and funded by the MacArthur Foundation. He received his B.S., Urban Systems Engineering in 1993, and his M.S., Facilities Management in 1997 from George Mason University.

 

Why_AUM

Founded in 1994,  AUM is celebrating its 20th anniversary of increasing Multifamily property NOI and RE value through use of its integrated Resident Billing and Energy/Utility Management tools.  For a no-obligation NOI Analysis and Program Plan that demonstrates what AUM can do to help your bottom line, click the button here.

No-Obligation NOI Analysis

 

 To learn more about our services simply click on this button.

AUM Services Overview

Tags: Energy cost, Utility expense Management, Energy consumption, Energy budgeting, Utility rate schedules, Multifamily, Energy Commodity Purchasing, Cost cutting

Energy Commodity Procurement Outlook - August

Posted by Dimitris Kapsis on Wed, Aug 13, 2014 @ 11:11 AM

 

Intro

Natural Gas Storage and Usage

Graph_1

Storage Levels Continue to Grow, but Not as Strong as Expected

Storage injections continue to replenish supplies depleted over our last winter; surpassing historic average injection rates for the 16th consecutive week. However, last week’s injection of 82 billion cubic feet fell short of expectations. US natural gas storage totaled 2.389 trillion cubic feet, further reducing the deficit from the 5-year average to 20% from 21.7% and down from a record deficit of 54.7% at the end of March.

 Chart

Weather Forecast : Transition to El Nino Conditions; Above Average Temperatures

Temperature Outlook

The weather agencies are all predicting a transition to El Niño conditions is underway. During El Niño conditions, the northern tier of the lower 48 states exhibits above normal temperatures during the fall and winter, while the Gulf coast experiences below normal temperatures during the winter season

The temperature outlook for August-October indicates above-normal temperatures in the West, Southern Texas, Southeast and parts of the Mid-Atlantic States. Below average temperatures may be felt in the Northern Rockies and Midwest.

Above average temperatures may lead to higher electricity consumption, resulting in higher prices. Also, higher temps may increase natural gas consumption at electric generation stations, thus causing reduced storage injections of natural gas. If the predicted above average temperatures occur, natural gas prices
may increase.

 Map

EC-Equal Chance for A.N.B.      A- Above      N- Normal     B - Below

Courtesy: NOAA

Energy Prices

Graph_2

Natural Gas Prices Move Up Each of the Last Three Weeks

Natural gas prices generally increase across most markets in August. NYMEX natural gas deliveries for September continue to rise since Mid-July; peaking over the $4.00/MMBTU level.

In August, Henry Hub prices started at $3.75/MMBTU and have steadily risen to market influencers like mild weather, increasing storage injections and a decrease in energy consumption typically cause prices to soften.

Energy Price Sensitivity in the Northeast

The Northeast natural gas prices have proven to be more sensitive to temperature than other regional markets. A few points about the Northeast energy and its correlation to temperature:

  • During summer months, the largest increase in natural gas consumption comes from the electric power generation sector, due to the increased need for cooling in homes.

  • As temperatures approached 90 degrees in New York and New England during July and August last year, natural gas spot prices surpassed $5 /MMBtu at hubs serving those areas. However, prices remained below $5/MMBtu at the national benchmark Henry Hub in Erath, Louisiana, and at the Tetco-M3 Mid-Atlantic hub near Philadelphia.

  • The northeastern United States is increasingly reliant on natural gas for power generation. In 2013, natural gas-fired power provided 44% of net electric power sector generation in the New England U.S. Census Division, versus a 26% naturally.

Graph_3

Note: Lines represent best-fit second-order polynomial equations based on a scatter plot of temperatures observed at major airports in each city, and prices at nearby market hubs. Best-fit lines do not extend to cover the entire range of all temperature and price observations. Spot prices are by delivery date.


Bottom Line: Natural Gas Prices Have Started to Move Upward

Are you Prepared?

Congratulations to all of you who secured long-term energy prices these past few weeks.

We have seen prices begin to move upward; when many market indicators would have normally driven it downward. Mild weather, low energy consumption and increased gas storage injections typically hold prices steady, if not cause them to drop. Now is the time to look at securing longer term natural gas and electric contracts of 24 to 36 months. Look to lock in winter gas now, before the El Niño and the real summer returns or a significant event happens.

As a caution to our clients during energy supply contract negotiations, please make sure transmission, capacity and ancillary charges are included in the price offerings and they are not just listed as a pass-through charge. We have seen several suppliers try to make their prices appear lower by not including these components in prices; just to give the appearance of lower prices. Don’t be fooled; let AUM help.

Tags: Energy cost, Utility expense Management, Energy consumption, Energy budgeting, Utility rate schedules, Multifamily, Energy Commodity Purchasing, Cost cutting

Energy Commodity Procurement Outlook - July

Posted by Dimitris Kapsis on Thu, Jul 10, 2014 @ 11:38 AM

Outlook

Now is the time to start securing longer term natural gas contracts of 24- to 36- months.  Time is running short to lock in low summer energy prices for both natural gas and electricity. Any worries about low storage levels going into this winter are waning with recent high injection reports.  Look to lock in winter gas now, before the real summer returns or a significant event happens.

 

Natural Gas Storage

Natural Gas Storage 7 14

Since our June report, natural gas storage levels received an injection boost of 430 BCF.  While storage levels are still lower than in years past, natural gas storage has reached 80% mark of the 5-year storage levels.  Good to see a strong recovery from this winter’s polar vortex.

Storage Table 7 14

Temperature Outlook

Weather Agencies are predicting below average temperatures for the next 6-10 days for the middle US with above-normal heat for the West and Southeast.  We are about half-way through summer and most regions have not experienced hotter than normal temperatures, as NOAA predicted.  The longer we go without prolonged high temperatures; the larger our natural gas supplies will be for next winter.  Also, our first hurricane, Arthur, had little impact on energy prices.

temperature 7 14

Energy Prices

Natural Gas

The NYMEX August gas futures continued to fall to the lowest levels this year.  After returning from the long holiday weekend, traders reacted to weather forecasts showing milder weather ahead indicating potential more strong storage injections.

In June, NYMEX natural gas prices set a new high 52-week high of $4.87.  The first week in July has seen prices drop to $4.19 / MMBTU; a 14% price drop.

NYMEX Settle 7 14

Electricity

Daily electric prices have seen the normal bump-up that summer brings.  However, in all deregulated markets, except the Northeast, future prices increase each calendar year of 2015, through 2018.  In the NY & PJM West, the future market prices see 2015 high and decline or are flat through 2018.

 

Bottom Line:  Take Advantage of Soft Market

Now is the time to start securing longer term natural gas contracts of 24- to 36-months.  Time is running short to lock in low summer energy prices for both natural gas and electricity.  Any worries about low storage levels going into this winter are waning with recent high injection reports.  Look to lock in winter gas now, before the real summer returns or a significant event happens.  Additionally, electricity pricing has stabilized further into the future; look to longer term contracts (24- to 36-months). 

A caution to our clients during energy supply contract negotiations: make sure transmission, capacity and ancillary charges are included in the price offerings, not just listed as pass-through charges, causing prices to appear lower.  Don’t be fooled; let AUM help.

 



Tags: Energy cost, Utility expense Management, Energy consumption, Energy budgeting, Utility rate schedules, Multifamily, Energy Commodity Purchasing, Cost cutting

May Energy Commodity Procurement Opportunity Outlook

Posted by Dimitris Kapsis on Tue, May 06, 2014 @ 12:16 PM

Outlook

Natural gas and electric prices continue to trade higher than last year.  High heating demand and increased industrial demand have contributed to higher pricing.  We expect the economy to continue improving, thus keeping industrial demand going strong.   We expect that the risk of higher pricing for both natural gas and electric supply outweighs any pricing downturn opportunities.  For clients still exposed to utility default pricing or variable pricing for both electric and natural gas loads, we highly recommend reviewing your accounts and negotiating for fixed contracts.   Clients should seriously consider securing fixed contracts with longer positions in the market with 24- and 36- month terms.

Natural Gas Storage and Usage

The month of April is complete and the weather still feels like late October.  It feels like the weather will jump from winter to summer without much of a buffer.  Meteorologists are still determining if the past winter was the 2nd or 3rd coldest in recorded weather history. Does it really matter? 

Spring time usually has a calming effect on energy prices due to low demand for cooling or heating.  But this year heating demand is still higher than normal in many areas, even though the summer season is fast approaching.

The current concern is the upcoming summer season with natural gas storage at an 11 year low -  approximately 50% below the five-year average.  To refill the storage to sufficient levels, (the 3.4 Tcf range by November 2014), storage injections need to average 86 Bcf per week.  To note, the highest-recorded average weekly injection number was 80Bcf, in 2003.  The market has started to show its doubts by recent price hikes.  Producers will need to increase their storage injections during the summer months, increasing demand.  In addition, if the hot summer temperatures are above average, we will have another demand component to deal with as electric generators will require additional fuel, with excess demand causing upward price pressure. 

This past month we experienced the first storage injections of the season and the first monthly gain of 159 Bcf since the beginning of the heating season.  Natural gas in storage is currently at 981 Bcf, almost one Tcf below the five year average figure (50% below) and 790 Bcf below last year’s level (45% below).

natural Gas Storage Tables

Underground Storage5.14

 

Temperature Outlook

Weather forecasts are encouraging for the next 60 days.  Temperatures are expected to stay in normal ranges during the next two months with limited seasonal energy demands.  If this weather trend proves true and continues into July, we could see a boost in storage injections because production continues to set records.  A month ago, NOAA was predicting summer temperatures hotter than normal by at least 5% as they compare to the 30-year average and definitely hotter than last year.  Only time will tell.

Temps5.2014

 

Natural Gas Production and Pricing

Let’s revisit the facts stated previously:  The natural gas storage inventory is the lowest it has been over the last eleven years, check.  Current temperatures do not allow for a robust start of the shoulder season injections, check.  Industrial demand for natural gas is rising, check.  Several nuclear plants are retiring, check.  The upcoming summer weather cooling demand is projected to be higher than last year and we have not experienced an active hurricane season for some time, check.  Five for five in any other category would have been great but in this case it is of great concern.

Early this week the May 2014 natural gas contract settled at a price of $4.795 per MMBtu, a 5% increase from last month’s figure.  The May settlement was 16% higher than last year’s May settlement.  The NYMEX natural gas price curve depicted below includes a polynomial trend line curve which continues to show a sustained upward trend.  The weather will continue to be the driving factor behind future pricing inclusive of the additional factors listed above.

Nymex Settle5.14 resized 600

 

Despite a great reduction in the active US natural gas rig count (currently at 310 rigs), production is still running at 67 Bcf per day, a record amount.  Our actual rig count is down by 59% compared to the five year average of 758 but shale gas is definitely pulling us through with 15.7 Bcf daily coming just from the Marcellus shale.

A positive outcome of the higher natural gas prices is that they have helped reduce demand from power generators by 7% compared to last year.  If prices remain at current levels we do not see much switching coming from current coal burning plants.

Bottom Line

As of April 24th, 2014 the 12-month average forward pricing curve for natural gas is at $4.74 per MMBtu, compared to last month’s $4.55 per MMBtu price.  We do not have anything left in the current heating season, but next heating season of November through March, is at $4.75 per MMBtu. 

The effect of the much colder than average temperatures on market pricing is very obvious.  Many could say that now is too early to start thinking about next winter season especially after the mess we had to deal with over the last six months, but if the upcoming summer hits the forecasted above-average temperatures with a sprinkle of hurricanes and the current storage situation experiencing levels 50% below the five-year average, we could be heading towards the perfect energy pricing storm. 

Some of our clients did take advantage of the low pricing positions back in May/June of 2012 while several clients grabbed the pricing opportunity last fall and secured contracts in order to cover their loads through 2014 and 2015, but those low-priced contracts are coming up for renewal, and they will experience the current market uptrends.  Our projection that the natural gas market will stay in the $4.50 per MMBtu range remains, and we still do not expect to see pricing below the $4.00 mark any time soon.  Now is the time to start securing loads currently riding variable rates for the upcoming summer, but we are running out of time.  Short-term contracts of 12 months or less are currently very expensive, longer term contracts of 24- and 36- month terms offer better pricing blend.  The pricing negotiated now could be a bargain compared to what is coming. 

The natural gas market has entered a process of setting a long term bottom in prices, consumers spoiled by a few recent years of low energy pricing will have to eventually adjust their expectations and move forward with renewed pricing targets and risk assessments.

Natural gas and electric prices continue to trade higher than last year, as high heating demand and increased industrial demand have contributed to higher pricing.  We expect the economy to continue improving, keeping industrial demand going strong, while the 2013-14 heating season could have established the bottom-price thresholds for the remainder of 2014 and beyond. 

We expect that the risk of higher pricing for both natural gas and electric supply outweighs any pricing downturn opportunities.  For clients still exposed to utility default pricing or variable pricing for both electric and natural gas loads, we highly recommend reviewing your accounts and negotiating for fixed contracts.  Capacity charges for next winter are already setting records in the Northeast.  Clients should seriously consider securing fixed contracts with longer positions in the market with 24- and 36- month terms, as  commodity and capacity pricing tend to stabilize into the future. 

As a caution, during energy supply contract negotiations, please make sure capacity charges are included in the price offerings and they are not pass-through.  They can be devastating for your budget if not secured.  The main concern right now is natural gas storage inventories for next winter.  We will know this possibly by the middle of the summer; I would not recommend waiting that long.

Tags: Energy cost, Utility expense Management, Energy consumption, Energy budgeting, Utility rate schedules, Multifamily, Energy Commodity Purchasing, Cost cutting

Boston Delays Benchmarking and Disclosure Reporting

Posted by James Kenneally on Thu, May 01, 2014 @ 12:21 PM

describe the imageToday, the Boston City Council voted  to approve the bill filed by Councilor Frank Baker to delay the implementation of the energy reporting and disclosure mandate in Boston for one year. The lone vote against the measure was Councilor Matt O’Malley (D-Jamaica Plain).

Click here to read the delay amendment.

In 2013 the City of Boston approved a new mandate requiring owners with buildings over 35,000 gross square feet to report and publicly disclose energy and water use. The law was to be phased in over three years starting this year.

Nine cities and two states have adopted energy benchmarking and disclosure laws. While all of them require building owners to track their properties' energy use, the laws vary regarding the size and type of buildings they affect; whether the energy use data must be disclosed publicly, or just to potential tenants or buyers; and other factors. 

Major unresolved issues have led to delays in implementation in other cities.  Seattle has revised its originally planned program and has twice postponed the date by which reporting is to occur for residential buildings.   Washington DC has had several years of delays and only recently issued rules nearly five years after the law was enacted.  

AUM will continue to keep multifamily property owners affected by this mandate and otherbenchmarking and disclosureinitiatives as they occur.

Tags: Energy consumption, Conservation, Sustainability and Benchmarking, Energy Efficiency, Benchmarking, energy disclosure, Seattle, Boston, Energy Building Audits

Energy Commodity Purchasing Outlook - February 2014

Posted by Dimitris Kapsis on Thu, Feb 06, 2014 @ 02:35 PM

Outlook

Currently, the risk of higher pricing for both natural gas and electric supply outweighs any pricing downturn opportunities.  For property owners still exposed to default pricing or variable pricing, we highly recommend reviewing your accounts now, and preparing for negotiations during possible upcoming pricing breaks. Daily market pricing for the northeast markets, especially New England, continues to set daily records.  If all goes as predicted over the next several weeks, expect some pricing decline, with buying opportunities in late February or early March.  You should consider longer positions in the market, with 18-, 24- or even 36-month terms and delayed contract starts.  Commodity and capacity pricing tend to stabilize further into the future.

 

Natural Gas Storage

Wow, what a difference a month makes.  Many of us survived a very cold December and actually looked forward to a snow-covered Christmas Holiday.  Unfortunately that was not the end of the story.  January came in with a vengeance, registering some of the lowest temperatures many of us have seen in a very long time.  On Monday, January 6th, 2014, below-freezing temperatures registered in all fifty states,  including Hawaii. 

Since our last report we continued to experience record high withdrawals from the national natural gas storage.  Last week the Energy Information Administration (EIA) reported a natural gas storage withdrawal of -230 Bcf, a figure within the analysts’ expectations but well above historic figures.  Natural gas in storage is currently at 2.193 Tcf, 437 Bcf below the five-year average figure and 637 Bcf below last year’s level.  In one month we experienced a 28.6% drop in storage levels while the five-year average called for a drop of only 22%.  Punxsutawney Phil did not have good news for us either.  On February 2nd he predicted six more weeks of winter; a brutally cold and long winter so far.

NYMEX Gas Settle resized 600

Natural gas storage inventories are now officially below the five-year historical range.  We expect the record high withdrawals to continue as long as the current low temperatures continue.

12.13 Hubspot storage graph

 

Temperature Outlook

Near-term forecasts are calling for temperatures to remain in the severe cold ranges through at least the middle of February.  If we do not get any reprieve from these extreme low temperatures by the end of February we will experience further natural gas pricing spikes, which in turn will push for electric pricing spikes right before the upcoming summer season.

Based on NOAA’s latest extended forecast, we should experience above-normal temperatures across the southern part of the US for the next three months.  We can only hope that some of this warmth will find its way up north pressuring pricing for both electric and natural gas lower.

12.13 Hubspot  Winter temps

 Courtesy:  EarthSat

Natural Gas Production & Pricing

Last week, the February 2014 natural gas contract settled at a price of $5.557 per MMBtu, a substantial spike in the pricing trend.  The latest monthly settlement was 26% higher than January’s settlement and the highest since January of 2010.  The NYMEX Natural Gas price settle curve depicted below includes a polynomial trend line (marked in red) which shows a sustained upward curve.  The weather is currently the major factor for the recent price spikes; temperatures through the middle of March could set pricing trends for 2014 and 2015.

12.13 Hubspot  Gas Settle

 

Our national dry natural gas production continues to exceed last year’s levels but it did drop to 65 Bcf/day this month due to the extreme temperatures and well-head freeze offs.  Once the temperatures settle back to normal levels the output is expected to climb back up to record high territory above 67 Bcf/day.

Even though we had very high increases in the price of natural gas, the market did not experience the expected gas-to-coal switching for power generation because the generators needed both types of fuel due to the very low temperatures.  If the current elevated natural gas pricing continues we will eventually see more and more generators ramp up electric generation from lower-cost coal-fired plants.

 

Bottom Line

As of January 30th, 2014 the 12-month average forward pricing curve for natural gas is at $4.44 per MMBtu, compared to last month’s $4.26 per MMBtu price.  In addition, the three-month pricing curve for the remaining heating season, February 2014 through March 2014, jumped to $5.01 compared to last month’s $4.37 per MMBtu, illustrating the obvious effect of the much colder-than-average temperatures on market pricing.

With each passing month it becomes more clear that the market possibly experienced its low point  in May/June 2012.  Several clients took advantage of these positions, but their low-priced contracts are soon up for renewal and they too will experience the market uptrends. However, we did have several clients grab the opportunity last fall tosecure contracts to cover their loads through 2014, with many through 2015. 

Current projections estimate the natural gas market returning to $4.00- $4.50 per MMBtu, but we do not expect to see pricing below the $4.00 mark any time soon.  If the weather gives us a break, we could see a buying opportunity in the next few weeks.

Natural gas and electric prices are continuing to trade higher than last year.  Natural gas production still remains at high levels even though the natural gas rig count has been considerably reduced over the last year.  Advances within the shale gas industry have increased production levels to record highs.  Current high heating demand and increased industrial demand have contributed to higher pricing.  We expect the economy to continue to improve, thus keeping industrial demand strong while the remainder of the heating season could establish the bottom price thresholds for the remainder of 2014.

Tags: Energy cost, Utility expense Management, Energy consumption, Energy budgeting, Utility rate schedules, Multifamily, Energy Commodity Purchasing, Cost cutting