PA Preview: When Rate Caps Fall, Choices Rise

By year's end, all of Pennsylvania's electricity rate caps will have expired, but that doesn't mean PA businesses should wait until then to shop the market. Dave Laipple, World Energy's Vice President of Sales & Operations, is liking what he sees in the market now -- low prices and lots of competition. "It's like PPL all over again," said Laipple, referring to the competitive market dynamics that took place last year in advance of the lifting of the PPL rate cap. "It's a great time to transact."

Two More Years! World Energy Renews Strategic RGGI Contract

World Energy is proud to announce it has renewed its contract with RGGI, Inc. to supply auction software and services for the ten state Regional Greenhouse Gas Initiative programs through July 31, 2012. Under the terms of the contract, World Energy will continue to act as the auction manager for RGGI's CO₂ emissions reduction program, the first such program in U.S. history. To date, the RGGI states have auctioned more than 200 million emission allowances on World Energy's platform, the World Green Exchange®, yielding $582.3 million for states to invest in green energy programs.

You Asked

Q: I am hearing a lot about "rate-cap expirations." What does this mean for me, and how can I make it work to my advantage?

A: By the end of 2010, all of Pennsylvania's electricity rate-caps will have expired, opening the market up to competition. This is a big change. The Pennsylvania markets have been insulated for years -- now they will be open to market movement and risk. The key thing is to take a proactive stance, get out there early and be prepared to act, just as you would want to if your current electricity contract was coming to an end -- because in a way it is.

The current hype is that once the rate-caps are lifted, prices will go up and energy buyers will be in for major sticker shock. The fact is your rates could go up, they could stay the same, or they could decrease, but by being proactive you can take control of your energy destiny and use the competitive dynamics of the open market to work for you. Our mantra at World Energy is that when suppliers compete for your business, you win. That should be your mantra, too.

Here are three quick tips for success:

1. Don't procrastinate: It is never too early to buy. Test the market now and see if you can put today's current low rates to work for you in the future.
2. Don't settle: Whether you are buying energy yourself or working with a broker, make sure you are getting the maximum number of suppliers you can to bid for your business.
3. Don't re-invent the wheel; Do put process and technology to work for you: Advances in energy procurement process and technology can streamline your procurement, maximize supplier participation and competition, provide price discovery, and ensure you are comparing apples to apples when evaluating contract terms.

For more on how to put rate-cap expirations to work for you, contact World Energy at marketedge@worldenergy.com.

Pricing Update

Natural Gas

In late April, Natural Gas prices finally closed the Gap Up that was created back in October '09. Looking back it is now easy to see that the round trip prices took up from October and back down in March to 4.50 was not much more than a trading adventure courtesy of snippets of news and fast firing trading shenanigans unsupported by the fundamentals. After all, the most notable constant through the entire period was a massive inventory overhead that averaged considerably above the 5 year. Then, earlier this week, information comes out projecting the Marcellus Shale area may yield 3 to 4 times the amount of gas only recently estimated. And then of course there is the promise of the Bakken area. It seems like only a hurricane has the potential of turning prices bullish. So, we'll keep a peeled eye out for hurricane developments as the season begins in three weeks, reiterating that the first cut at hurricane analysis by specialized meteorologists predict a higher level of activity than last year with the focus of landings in the Gulf. Ironically, the BIG oil spill in the Gulf is not expected to affect the supply of gas from offshore.

Technically Natural Gas remains in a clearly defined trading range between 4.4 on the up side, and 3.9 on the downside where support has become increasingly strong. While the MACD shows a slight measure of support, these indicators, taken together, do not suggest a strong upside breakout is imminent. In any case, Natural Gas would have to break up through both the top of its tight trading range delineated on the chart, as well as downtrend resistance at 4.57, to change the IT and LT trends to up.

PJM

Since early April, the temperatures in the PJM regions have tended to be warmer than normal, if stormy. The eastern half of the US has recently been treated to warmer than normal temperatures which helped to reduce demand for electricity until the past week when much warmer than normal temperatures increased demand as reflected in the upturn in both our technical indicators. In fact, the MACD turned enough to cross up through its signal line confirming a ST change in trend. Adding weight to the importance of this technical action is the fact that the upturn falls right into the period when spring hands off its work to herald the onset of the summer season's run up in demand for cooling. The National Weather Service (NOAA), however, predicts there will be a pause for the next ten days before the run up begins in earnest in the Northeast, while the pause will be slight in the mid-Atlantic region. And the Southeast region down to the Gulf coast will be quite a bit warmer than normal. See the NOAA map at this link: www.cpc.ncep.noaa.gov/products/predictions/814day/814day.01.gif

~ Tom Dziki, Senior Vice President of Sustainable Development, United Natural Foods, Inc.