The August wholesale natural gas contract rose Monday as hotter temperature forecasts had energy traders betting demand for the fuel would increase with temperatures expected to soar across the Northeast early this week and forecasted to be followed by an even stronger heatwave across the Great lakes and Northeast late this week into early next week. However, this heat is expected to subside in the 11-15 day forecasts to milder temperatures in the Northeast. The August wholesale natural gas contract settled up 8.3 cents, or 2%, at $4.288 a million British thermal units on the New York Mercantile Exchange yesterday. In the financial front, stock markets were in full retreat yesterday as yesterday’s meeting of European finance ministers produced a vague statement that the European Union would stand to prevent any catastrophic risk, however, the markets didn’t get any details as what this meant. It seems that Greece continues to march toward default since they will need debt relief sooner rather than later. This continuing story will put all markets on risk mode until this story finalizes itself.
On the environmental front this morning, the EPA recently announced details of the Cross-State Air Pollution Act which is set to force power plants in 27 states to significantly reduce sulphur dioxide and nitrogen oxide emissions by as early as January 2012. The legislation will impact natural gas, coal, and power prices in the United States as energy traders expect a significant demand pull on natural gas in the Calendar 2012 - 2013 timeframe. Power plants will potentially scramble to add scrubbers for coal generation and therefore reduce SO2 emissions thereby being forced to burn natural gas. Some energy companies are expecting that there will be a 2 Bcf/day year on year gas demand beginning in 2012 as stringent SO2 limits force coal-gas switching. Additionally there will be a reduced demand for coal in 2012 due to forced coal switching. Also, demand will shift from higher to lower-sulphur coal that as energy companies are expected to comply with guidelines. The impact of this will should result in higher power prices as coal is removed form the generation stack and utilities use higher priced inputs for power generation as not all utilities have enough gas fired generation to replace their coal generation.
On the shopping front this morning, some energy statistics from our Northeast utilities indicates that many residential shoppers have not switched away from the utility service in areas such as Coned, Lilco, Keyspan and Central Hudson. Only 9.3% of the residential accounts have switched to an alternative supplier in Lilco while 15.6% of the total available residential accounts have switched to an alternative supplier in Coned. In Central Hudson, the percentage of shoppers amounted to 13.9% and Keyspan with an equivalent 19.9% consumers switching. These figures probably indicate that alternative suppliers have not reached these consumers or they haven’t received enough of an incentive to switch their natural gas accounts.