Realgy does not speculate on price changes
The CNBC article “Natural Gas could rise to $8: Energy expert” is an interview with a natural gas trader. One noteworthy facet of traders’ work is that they speculate on the changing cost of natural gas so as to profit from a price increase or decrease.
This is EXACTLY opposite from what Realgy does.
Realgy tries to buy natural gas so as to deliver the lowest price to our customers. The greatest variable in doing this is the changing volume of natural gas used by our customers.
Consumption or demand for natural gas; this is an instance where the trader and the energy marketer are both dependent on the weather (along with storage). Weather is the greatest driver in how much natural gas will be used; storage allows for a buffer in allowing the gas in storage to be readily available for use.
In the CNBC article, the discussion about the weather affecting consumption (withdrawals from storage equate to higher demand) is accurate. However, the coldest winter in 20 years would create disruption in any market place. So gas prices should rise when demand soars; the law of supply and demand dictates they do.
So the question is, by how much? Should they rise 27% in a day, followed by 15%, etc.? The answer is…probably not. This is when traders’ speculation drives pricing for which ALL users pay.
Realgy works with traders but does not speculate on price changes for natural gas or electricity.
Check out the CNBC article: “Natural Gas could rise to $8: Energy expert”
In Response to “Hedge funds bet on US gas shortage as cold boosts demand”
Written by Michael Vrtis, President of Realgy Energy Services in response to the Fiscal Times article “Hedge funds bet on US gas shortage as cold boosts demand”
Remember the financial crisis (is it over?)? Then this article should strike a familiar note. Hedge funds influencing the commodities market.
Inarguably the cost of natural gas has skyrocketed (some say far in advance of demand). As hedge funds buy NYMEX futures those purchases increase the prices as they create additional demand. This additional demand does nothing more than allow the hedge funds to place a bet on the NYMEX and their bet is then passed along to every user of natural gas. Accordingly, their speculation inflates the price of the NYMEX contract prices and therefore passes along these costs to ALL end-users (we call them customers) whose contract is tied to the NYMEX.
Part of the Dodd-Frank financial reform was to limit the influence of hedge fund speculating in the market.
Realgy cannot influence the NYMEX. However, the use of our proprietary ManagedPriceTM agreement minimizes reliance upon it. The ManagedPriceTM allows our energy buyers to use NYMEX, along with fixed price and INDEX purchases. The result is to minimize the impact of any single natural gas price and allow for consistent pricing that beats the utility costs. The history of the ManagedPriceTM program has shown it’s effective at mitigating short-term price spikes when used in conjunction with our Storage program and PriceWatchTM Service.
Check out the article in Fiscal Times: “Hedge funds bet on US gas shortage as cold boosts demand”
The First Electric Generator of Its Kind
The Ivanpah solar power plant in the Mojave Desert officially opened Thursday February 13, 2014 after almost four years of construction, and is the first electric generator of its kind.
A field of mirrors at the Ivanpah power plant in California. Jim Wilson/The New York Times
“…focuses sunlight from 350,000 mirrors onto 2,200-ton boilers 339 feet in the air to make steam that drives turbines to produce electricity”
To imagine what this is, put yourself at the beach, you are 6 feet tall (or you’re standing on a beach chair), and you look as far as you can to the horizon; that should be about 4 miles. From this spot on the beach, 350,000 mirrors are spread over a distance farther than you can see (5 miles in all directions) and all those mirrors direct the sun’s rays onto the surface of a boiler that gets hot enough to produce steam which is used to drive a turbine to produce electricity.
That is cool!
It will take bold and imaginative ideas and, while some ideas may prove to be impractical, we will find ways to continue to create energy for the world’s consumers that can be sustained (without damaging the earth for the next 100 years).
Realgy has invested in photovoltaic (PV) solar generation where the sun light is converted into electricity within the solar panel.
Check out the NY Times article: “A Huge Solar Plant Opens, Facing Doubts About Its Future”
Natural Gas at Five Year High
Natural Gas prices have made a jump above $6.00 Dth or $0.60 / therm in the wholesale market; this is a 30% increase in the last couple days!
This increase looks speculative by traders but if it holds till February 26th it will set a five year high for the NYMEX first-of-month pricing and will keep bills high
The Bloomberg News article “Natural Gas Gains With Coffee as Commodities Jump; S&P 500 Rises” discusses the impact of natural gas and other commodities from the traders perspective.
Natural Gas price increased 27% on February 18, 2014
To keep track of the wholesale prices please enroll with Realgy’s NYMEX reports. It will send you NYMEX end-of-day reports daily.
Realgy is working to ensure our pricing stays as low as possible. Given we are all dealing with the coldest winter in 20 years and the highest energy prices in over 5 years.
Why are natural gas bills so high?
Two factors are at play on your bill; the amount of energy used and its cost. The following example is based on natural gas but electricity would be similar.
| This Year | Last Year | |
| Usage in Therms | 113 | 72 |
| This winter is 13% colder than Normal. | ||
| Gas cost/Therm | $0.718 | $0.420 |
| Average gas prices have more than doubled | ||
| Billed | $81.13 | $30.24 |
| Your bill will be the higher than it has been in the last 5 years | ||
Last year was warmer than a Normal* winter; in fact it was 72% of Normal in December 2012 and January 2013.
So if in a Normal year you use 100 Therms of natural gas, last winter you used 72. This was when the price of natural gas was about $0.420/Therm.
Now consider this December 2013 and January 2014 winter that is 13% colder than Normal.
So you will use 113 Therms. This is when the price of natural gas is about $0.718/Therm.
*a Normal winter is an average of 20 winters