COVID-19: Reducing Electricity Costs

Published: March 17, 2020

As your business undergoes significant changes in the coming weeks and months, COVID-19 will, without a doubt, impact your bottom line. However, the current lows in the market may offer opportunities to reduce operational expenses. The combination of weak winter heating demand and pandemic fears have brought natural gas and electricity markets to historic lows.  And while utilities promise to halt disconnects, what they are not discussing is ways to lower the bill overall. As commodity prices are in a free fall, a well-timed energy contract could make a positive impact on your operational expenses. 

“The economic downturn puts pressure on global oil prices leading the Organization of Petroleum Exporting Countries (OPEC) to consider further cuts to production. It hurts demand for natural gas during a time of extremely low prices. It changes the economic, energy, and climate policymaking environment in China, one of the most consequential energy consumers and sources of greenhouse gas emissions.” - Sarah Ladislaw, Senior Vice President and Director, Energy Security and Climate Change Program

Henry Hub, the delivery point for natural gas futures, has fallen 22% in 2020. Commodity prices are in a free fall. The below charts, provided by one of our vendors, articulates the average wholesale prices for energy supply. While these are not all-inclusive rates, they do show a strong indication of the current market conditions.

 

The chart reflects PJM West Hub prices. Average wholesale prices are based on a large block purchase of electricity at 100% load factor. Prices do not include charges for load following, imbalance or management fees typically included in retail supply quotes reflecting charges to the customer's meter. In addition, losses, transmission, ancillary and delivery costs are not included. Chart and information provided by supplier MidAmerican Energy Services.

 

The chart reflects New York-Zone G prices. Average wholesale prices are based on a large block purchase of electricity at 100% load factor. Prices do not include charges for load following, imbalance or management fees typically included in retail supply quotes reflecting charges to the customer's meter. In addition, losses, transmission, ancillary and delivery costs are not included.  Chart and information provided by supplier MidAmerican Energy Services. 

 

Prices this low may not last as long as the virus. Buyers will look to defer or cancel contracts. Producers will curtail production due to lower demand. New generation will be unable to go online due to debt. Governments might change policy to spur the economy.

If you have an electricity supply contract ending in the next 18 months, now is the time to be shopping. Diversegy, subsidiary of Genie Energy (NYSE: GNE), is a commercial energy advisor working with commercial and industrial customers. We have a nationwide portfolio of vendors that can help reduce electricity costs. In addition, we have a wide variety of strategies outside of procurement that can help large & complicated users reduce their energy expense further (i.e. solar, LED, HVAC, Demand Response.)  

 

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