We are currently seeing electricity prices as low as we have seen in the past 10 years. In Texas the price of electricity is tied directly to the price of natural gas. In other markets such as Pennsylvania the price is also tied to natural gas although the correlation is not as tight as it is in Texas. In the chart below you can see that when Texas deregulated in January of 2002 the price of natural gas was trading in the mid $2 dollar range. As of this writing the price of natural gas is just under $2.50 per MMBTU.
So what does this mean? Well if you are interested in making a well timed energy buying decision for you business or home for that matter, then now would be that time. Some of our clients are large global organizations with highly trained energy managers. They have engaged us to procure fixed electricity contracts for the next 5 years. It’s always a good idea to consider what the “smart money” is doing in a market. Right now the smartest guys we have the privilege of talking to are taking this opportunity to lock in very low rates for the as far as their credit will allow them to go.
With rates in the $.04-.05 cent/kwh range going out 5 years for businesses there is no disputing that we are experiencing an incredible opportunity to lock in historically low rates. To be clear, the natural gas market is very soft and we see no indication that it will go back to $14 like we saw in the summer of 2008. However, all you have to do is look at the historical chart to see how quickly we can go from $2 to $5, more than a 100% increase.