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The August wholesale natural gas contract was higher yesterday by $0.052 on the 6 to 15 day forecast which is still calling for above average temperatures for the eastern half of the nation. It seems that the only supportive theme holding up natural gas prices is the above normal temperatures in the energy populous cities in the Northeast. We’ll have to see what occurs once the above normal weather subsides later in the month as head towards Labor Day. One other point to note is that it seems as though a bidding war has begun over Southern Union. Energy Transfer has upped the ante to 5.1 billion but Williams Co. may still counter for a second time.
On the strategic side of sending out bad news to the mass markets, Peco Energy Co. is formally notifying 215,000 residential customers that two popular discounted rates will expire at the end of next year, but it is rationing out the bad news to reduce the chance that irate ratepayers will overwhelm its call center. The Philadelphia utility is sending letters to 11,000 customers each week over four months to let them know that the end is near for their discounted electric heating and off-peak water-heating rates. Peco began sending the letters last month according to a company spokesman announced last yesterday. The notifications are being spread out to prevent a tsunami of customers from calling Peco's switchboard at once(smart thinking). The discounted rates, which were established decades ago to encourage customers to switch to electric heating, will be cut by half and then eliminated altogether by the end of 2012. Since Jan. 1, dozens of alternative suppliers have launched campaigns to supply discounted power to Peco customers. Under deregulation, Peco continues to distribute power over its wires, but customers are free to shop around for a supplier of the electrical commodity. For customers who don't switch, Peco provides power at a default rate. But to make the default rate equitable, the Pennsylvania Public Utility Commission ordered Peco to end the discounts, which are effectively subsidized by other ratepayers.
On the wholesale side of the natural gas market, top analysts in the natural gas market see the longer-term storage deficit widening as warmer-than-normal temperatures prompt refills less than the five-year average. Even though, natural gas production continues at a robust pace, some analysts are observing that last week despite the EIA reporting Lower 48 gas output is at its highest level in six years, at 69 Bcf/d that our deficit versus the five year average will continue to widen. At the present time, natural gas storage levels are still 243 bcf behind last year and 62 bcf behind the five year average. Analysts are projecting the five year average deficit being of 62 Bcf presently, will widen moderately to 88 Bcf as of July 22.
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