Why You Might Want to Start Evaluating Electricity and Natural Gas Prices Now

October 11, 2018

As we’ve mentioned in prior publications, timing is important in the electricity and natural gas markets. Because forward prices are near historic lows, you should consider acting now rather than simply consider prices shortly before your current contract expires.

The expiration month of an energy supply contract is what often influences many customers to start looking at what to do next. That’s no surprise; constantly monitoring the energy market is time-consuming and requires sufficient expertise to understand prices and trends. As such, many customers put it off until time is short. With detailed market information and price analytics in hand, it is possible to finalize an electricity or natural gas supply contract now no matter when your current contract expires. The contract can have a locked-in low price for 1 to up to 60 months that begins in any future month.

Important indicators that it may be a good time to evaluate prices for your next contract are the forward price market trends for both natural gas and electricity. This is true no matter when your contract expires, even if it is in 2-3 years. By monitoring the forward prices (prices for electricity/gas purchased now at an agreed upon price but delivered at a future date), we can determine how the prices for a contract that starts in any forward month, in each energy market, are trending. For example, forward price trends may indicate that as of today, prices for a November 2020 contract start month may be lower now than they were in November 2017 and that prices are trending up and thus might be higher in mid-2020, a few months before the contract start month.

At APPI Energy, every day we gather thousands of price data points from many suppliers and examine the trends of the forward prices. We benchmark and compare the past and future price trends. By doing this, we’re able to create a uniquely informed view of when is a very good time to start evaluating prices for the next contract. We utilize our data analytics to provide our clients with price/timing recommendations specific to the customer’s energy service territory based on historical and future prices. We provide customers insights about good times to lock-in a price and which contract term length is most favorable to each customer’s specific circumstances.

Given that forward prices today for both electricity and natural gas are very near historic lows, it is likely that a customer will benefit from evaluating energy supply prices now. There are many benefits to this strategy. If a customer is offered a price and contract term that meets their parameters, the price can be locked-in now and the customer can budget its energy expense well into the future. This removes the potential risk of prices escalating as the current contract expiration nears. Even if a customer does not find a satisfactory solution now, the customer will have valuable information in hand about real-time prices that they can use to inform their decision-making later. Finally, if the customer does not transact now they still have time before the contract expiration to try again.

For more information regarding forward pricing and how APPI Energy obtains prices from many vetted energy suppliers customized to your supply profile and buying requirements, please contact APPI Energy at 800-520-6685.