Why You Should Be Renewing Your Electricity Contract Now

Summer vacations, beaches, and celebrations – it’s that time of year. Who wants to be concerned with energy supply contracts at a time like this – nobody but us energy advisors. We are in the energy markets every day transacting supply agreements for our clients. We monitor and analyze market fundamentals so we can help you understand when, what, and how to purchase your energy to meet your budget and risk management goals.

As we look at the market fundamentals now, we see natural gas supply in a strong position and solid but not exceptionally robust demand growth. The most significant demand factor is perhaps the planned export of additional natural gas (LNG) in the next couple of years. Generally, the current market is reflecting this outlook, with electricity and natural gas prices trading close to market lows out through the next few years. While there is always the chance that prices will come down, barring a significant demand destruction event, we believe there is a higher likelihood for prices to increase over the next few years than decrease. In particular, we see the continued increase of renewables, retirement of base load electric generating capacity, and constraints to the delivery of natural gas putting upward pressure on total retail electricity prices. In fact, we have seen some of this influence in Texas, California and New England this year.

When you put off your energy contracting until your contract is about to expire, you limit your options. Taking the longer-term view of the market and understanding what options you have to start mitigating price risk over the next few years is critical to executing a strategic approach to energy procurement, and providing yourself with the opportunity to save thousands of dollars. Currently, many of our clients are looking at pricing and extending contracts into 2022/2023. Let us help you to develop and execute your own customized energy procurement plan. Contact your Usource energy advisor to see what’s right for you.

About the Author

Scott MacDonald is Usource's Managing Director. Scott has 25 years of experience in the energy industry and is a recognized expert in energy economics and consulting. He has a MS from MIT and a BA in economics from the University of New Hampshire.

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