Impacts on Commercial Natural Gas and Electricity Purchase and Planning
The global impacts of COVID-19, as well as the impacts on the United States, have clearly been devastating. The US death toll now exceeds 50,000, eclipsing the entire number of US troops killed in the decades long war in Vietnam. In addition, oil prices are in negative numbers with potentially hundreds of US oil companies facing bankruptcy, cities are opting out of municipal power aggregation agreements owing to COVID-19 induced budget crunches, several US grid operators are reporting COVID-19 related load impacts and America is largely shuttered as huge segments of the economy have ground to a near standstill – with millions out of work or working from home, while others remain busy in services and industries deemed essential. The impact on the Natural Gas and Electricity markets have also been significant, with second and third order effects which merit very close examination —- and strategic planning.
In spite of the dire news, America will prevail and our economy will rebound. But the time to plan for sustainment in current operations and to create a strategy for future operations, as well as prepare for the exploitation of future business opportunities, is NOW. Watching and waiting is not a course of action. We must be proactive and not reactive. The power and gas markets are no different and we must all bear in mind that energy is the catalyst that fuels American business and industry and energy is what makes commerce possible.
Focusing just on energy supply, to sustain current operations and plan for future operations, businesses must examine five critical questions:
NYMEX Henry Hub Calendar Year 2021 Natural Gas Forwards rose from just over $2.25/MMBtu on April 9, 2020 to $2.65/MMBtu on April 20, 2020 while Calendar Years 2022 through 2024 remained relatively stable, hovering at just under $2.50/MMBtu during this same time frame – shadowing the onslaught of increased COVID-19 infections as well COVID-19 related deaths.
Oil demand is plummeting and oil rigs are closing with increased frequency. 16% of US natural gas is produced as an oil byproduct. COVID-19 has dramatically reduced the demand for oil. With less natural gas produced as an oil drilling byproduct, natural gas prices are trending up. The cheap gasoline prices you are seeing at the pump are a direct result of decreased demand which equals less drilling which, in turn, equals a spike in natural gas prices. Natural gas is the primary driver of electricity costs in the US Mid-Atlantic region and as natural gas prices trend upward, it is reasonable to expect the same for electricity prices in the near term. What must be examined is a future energy cost containment strategy in Calendar Years 2021 – 2024, especially, given – at this moment, the relatively stable natural gas prices in the outyears. Resource Energy is exceptionally well positioned to guide our clients through what appears to be a volatile 2020 all of the way through to potentially more cost-effective pricing opportunities in 2021 – 2024. Of prime consideration in a post COVID-19 America, is where will electricity and natural gas prices be when tremendous pent-up demand is released – while potential natural gas supply may be unable to meet such demand? In fact, JP Morgan analysts forecast an 8.5B cf/day drop in US gas production in 2020 and a 3.5B cf/day in 2021. Increased energy prices on the heels of staggering business losses could pose a significant rebounding blow induced by COVID-19 on US businesses and allied service industries. Resource Energy can help you navigate through these dangerous waters and assist in mitigation of current and future energy price risk. With Resource Energy, energy is not just a resource, it’s a relationship. Let us work hand in glove with you to stem our losses and plan for a brighter future – as businesses and as a Nation.
Resource Energy partners with multiple well known national and international level suppliers, all of whom are exceptionally credit worthy. Such credit worthiness is a critical factor in determining the financial resiliency of an energy supplier’s ability to maintain the continuum of supply and operations during periods of financial, operational or political crisis. All of our suppliers remain fully capable and responsive during the current COVID-19 crisis with undiminished overall operational capacity and critical information flow and we are proud to have robust business relations with such industry icons. By partnering with such suppliers, Resource Energy provides its clients with the POWER OF CHOICE, thoroughly analyzing what offerings, terms and conditions our suppliers provide in response to bids on behalf of our clients, ensuring an optimal solution is presented in pricing, terms and risk Our clients are in the driver’s seat, being integral in making the final supplier selection. Our suppliers compete for our clients’ business. Resource Energy, as well as its carefully chosen supply partners, are weathering the COVID-19 storm and moving forward in a steadfast manner, continuing to save our clients money along the way. Resource Energy as well as its supply partners, are there for our clients now and likewise, will be there for our clients after the COVID-19 crisis has passed. We take our corporate motto to heart – “Energy: It’s not just a resource, it’s a relationship.” We have, and will continue to have, enduring relationships with both our clients and suppliers which withstand the twin tests of crisis as well as time.
By using a competitive bidding process with multiple credit worthy suppliers, Resource Energy is not wed to a single source for procurement. Rather, in concert with our clients, the most competitive energy supply bid, coupled with the most favorable terms and risk, comprise some of the key factors used in selecting a supplier partner to service our clients. Using this operating model, our fiduciary responsibility rests with our clients – not a given supplier. Resource Energy is an unparalleled advocate for its clients, placing their interests first while setting the conditions for long term client success in reduced energy spend and client energy portfolio management.
Resource Energy has an enormous portfolio of potential energy solutions our clients may utilize – with our team providing value based judgements and analysis to assist our clients in selecting the product which best meets their energy procurement objectives while using reducing energy spend, conducting a detailed risk analysis, performing energy supply contract analysis, carefully reviewing proposed terms and conditions as well as evaluating a given energy product(s) for client suitability. Whether it be a Fixed Price solution, Load Following Block, Financial Block or an Index Plan – or a hybrid solution, Resource Energy will find the optimal power solution for our clients through a consultative process which begins day one. Likewise, we offer a myriad of solutions to service the natural gas requirements of our clients. Additionally, Resource Energy provides multiple allied services such as Tenant Utility Billing, Consolidated Energy Performance Reporting (individual property level and parent organization level), Sustainability Reporting, Compliance Reporting (thereby avoiding fines) and we offer a Dashboard which provides a comprehensive common energy operating picture for use by key decision makers and stakeholders. Resource Energy provides the products and services our clients need and gives them the visibility to manage them.
Ongoing energy market intelligence is vital to properly manage energy assets and costs. Decision makers must know where the energy market is trending, what statutory and regulatory requirements are looming which will affect operating costs, what future energy costs look like as well as ongoing input to shape or modify organizational energy strategy. Resource Energy purchases future energy curves which enable us perform industry leading predictive analysis on future energy pricing, uses proprietary technology to manage client energy assets and costs, and remains current on all regulatory and statutory energy compliance and reporting requirements and in so doing, mitigates the impact on our clients. We share this information on an ongoing basis with our partner clients, optimizing predictability while ensuring are our clients are postured to make informed energy management decisions that best meet the needs of their organization.
We wish you all the very best in this time of crisis. We will overcome COVID-19 and America will prevail, but we absolutely must consider a consequence management strategy in all aspects of our businesses. Resource Energy stands ready to assist its current clients and potential future clients with their energy needs. For more information, please contact Max Bowers, Vice President, Business Development at firstname.lastname@example.org.