What To Expect For Electric And Natural Gas Rates In 2021?

It was noted in this column earlier this year that the pandemic resulted in shutting down oil production and choking the supply of gas. The number of gas wells was reduced from 183 in 2020 to 81 at last count. As a result, this gave notice to Hedge funds and gas speculators to go long on rising prices for the first time since last May of 2020.

They were not kidding…Today, let’s look at the landed price of natural gas in New England through the Algonquin or Tennessee City Gate prices. Utilities, power generators and suppliers are buying natural gas at $1.20/therm in February. The average third-party supply is about $0.60/therm. The chart in Figure 1 illustrates the spikes in December and February.

Although the increases reflect the higher winter demand, what is of interest is how the NYMEX market remains high during the summer of 2021 that should typically go down after the winter as noted in the 2022 numbers.

So, the good news is that third-party rates will remain low going into 2022 and beyond given an enrollment near the end of this year. Our caution is with next winter and beyond. It is expected that natural gas inventories will continue to fall versus the 5-year average while the hedge fund technicals will have a bias towards higher prices. That coupled with the uncertainty of federal regulations that lean towards the reduction of fossil fuels will no doubt result in bumps in the road.

Neighborhood Energy is here to help steer you and your business in the right direction.