Summer Energy Outlook

The latest update from MXenergy's pricing desk:

Summer 2007 officially begins on June 21, but the Northeast has already experienced a mini heat wave. If the last eight days in May are any indication of the upcoming season, gas-fired electricity generation will be in high demand.

A recent report published by the Canadian National Energy Board indicated that North American gas supplies should be relatively stable this summer which will help stabilize gas prices. Until we get into the reality phase of the summer, exceptions such as hot weather and hurricane-induced supply disruptions will not be reflected in the price of natural gas. However, according to Weather 2000, a private weather forecaster, the last eight days of May will be recorded as the hottest for that period in New York and the Northeast since 1991. It is likely that this mini heat wave has increased demand for gas-fired electricity generation for cooling.

The storage build for the week ending May 25 was 107 Bcf putting the balance at 2.053 Tcf (21% above the five-year average but 8% below this time last year). On the electricity front, a study released Tuesday by the New York Retail Energy Supply Association shows deregulation has put downward pressure in prices with New York having the highest electricity costs in continental U.S. After adjusting for inflation, New York electricity costs have decreased by 9 percent from their pre-deregulation peak in 1994, and prices have been rising slower in deregulated markets than the regulated. Rising fuel prices in the last five years, especially for natural gas, has been a major component of increased electricity rates. Despite these price increases, customers have saved $1.3 billion in New York, New Jersey, Pennsylvania and Maryland over the last ten years.