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About MMA MunEnergy It may be time to take advantage of low power prices
At this time last year, electricity prices were almost double what they are today. Last August, National Grid’s variable basic service rate for medium and large general service customers in the Greater Boston area was 15.859 cents per kilowatt hour. As of last month, these same customers were paying 7.107 cents.
The major factor contributing to this drastic reduction is the weakened economy, which caused a decrease in natural gas and oil markets. Natural gas is a major fuel source for power plants in New England, so there is a direct correlation between the price of electricity and the price of natural gas in the region. Natural gas has recently fallen below $4 per million BTUs, down from $12 at last year’s peak time.
For municipalities that have been waiting for the opportune time to lock in electricity rates, now might be that time. Municipalities seeking long-term price certainty should consider long-term strategies to manage price volatility. These strategies can help in budget planning and managing cash flow.
What does a competitive electricity supplier offer over the utility? A supplier can offer a fixed-price product that will allow the customer to take advantage of these lower prices for the long term. Once the customer enters into a service agreement, the price for electricity is locked in for the duration of the contract term, regardless of what happens with market prices. Other costs associated with providing electricity – such as ancillaries, capacity, transmission, line losses, and the like – may be fixed or passed through at cost.
Municipalities enter into long-term contracts to achieve budget certainty, so that accurate, year-over-year electricity budgets can be set, regardless of market volatility. There is never a guarantee of price savings, however, or that the market will remain at the level it was when the municipality entered into an agreement.
In cases where a municipality locked in at a much higher rate than what the market is currently offering, the energy supplier may be able to offer assistance in one of two ways. First, the customer may be able to enter into a demand response program, which can generate financial incentives for municipalities that are able to curtail electricity usage during periods of peak regional power demand. Second, depending on the length of the contract, the municipality may be able to layer additional purchases onto its purchase in order to experience some immediate price relief. These opportunities are typically reviewed on a case-by-case basis, and there’s no guarantee that the municipality will qualify, but it’s certainly worth exploring.
The price a supplier can offer for electricity actually changes on at least a daily basis, in response to changes in the wholesale market. Competitive suppliers are constantly sampling the market to determine what supply is available and, as a result, what prices can be offered to customers. When the price is lower, the supplier purchases the power at a lower rate; it can, in turn, offer a lower price to the customer.
Market trends indicate that we should not expect the current low prices to continue much longer. Once the cold winter weather hits, demand is likely to be back up again, and so, too, might gas prices.
For more information, contact MunEnergy Program Manager Emily Neill at (617) 772-7513 or This e-mail address is being protected from spambots. You need JavaScript enabled to view it . Constellation NewEnergy is the endorsed supplier to the MMA’s MunEnergy program.
About MMA MunEnergy It may be time to take advantage of low power prices
It may be time to take advantage of low power prices
At this time last year, electricity prices were almost double what they are today. Last August, National Grid’s variable basic service rate for medium and large general service customers in the Greater Boston area was 15.859 cents per kilowatt hour. As of last month, these same customers were paying 7.107 cents.
The major factor contributing to this drastic reduction is the weakened economy, which caused a decrease in natural gas and oil markets. Natural gas is a major fuel source for power plants in New England, so there is a direct correlation between the price of electricity and the price of natural gas in the region. Natural gas has recently fallen below $4 per million BTUs, down from $12 at last year’s peak time.
For municipalities that have been waiting for the opportune time to lock in electricity rates, now might be that time. Municipalities seeking long-term price certainty should consider long-term strategies to manage price volatility. These strategies can help in budget planning and managing cash flow.
What does a competitive electricity supplier offer over the utility? A supplier can offer a fixed-price product that will allow the customer to take advantage of these lower prices for the long term. Once the customer enters into a service agreement, the price for electricity is locked in for the duration of the contract term, regardless of what happens with market prices. Other costs associated with providing electricity – such as ancillaries, capacity, transmission, line losses, and the like – may be fixed or passed through at cost.
Municipalities enter into long-term contracts to achieve budget certainty, so that accurate, year-over-year electricity budgets can be set, regardless of market volatility. There is never a guarantee of price savings, however, or that the market will remain at the level it was when the municipality entered into an agreement.
In cases where a municipality locked in at a much higher rate than what the market is currently offering, the energy supplier may be able to offer assistance in one of two ways. First, the customer may be able to enter into a demand response program, which can generate financial incentives for municipalities that are able to curtail electricity usage during periods of peak regional power demand. Second, depending on the length of the contract, the municipality may be able to layer additional purchases onto its purchase in order to experience some immediate price relief. These opportunities are typically reviewed on a case-by-case basis, and there’s no guarantee that the municipality will qualify, but it’s certainly worth exploring.
The price a supplier can offer for electricity actually changes on at least a daily basis, in response to changes in the wholesale market. Competitive suppliers are constantly sampling the market to determine what supply is available and, as a result, what prices can be offered to customers. When the price is lower, the supplier purchases the power at a lower rate; it can, in turn, offer a lower price to the customer.
Market trends indicate that we should not expect the current low prices to continue much longer. Once the cold winter weather hits, demand is likely to be back up again, and so, too, might gas prices.
For more information, contact MunEnergy Program Manager Emily Neill at (617) 772-7513 or This e-mail address is being protected from spambots. You need JavaScript enabled to view it . Constellation NewEnergy is the endorsed supplier to the MMA’s MunEnergy program.
Written by MunEnergy Program Manager Emily Neill
