Considering we call this newsletter “The BUZZ”, we have to touch on electricity from time to time…touch base, anyway. And this week, for the first time in quite a while, something caught our eye that brought the electric market to our attention.
As we’ve discussed in previous articles (by the way, we’ll be moving the entire archive of this newsletter to the Cost Containment Intl. Web site in the near future, so you’ll be able to catch up on past entries), electricity prices have closely tracked natural gas prices in the deregulated markets. Checking NYMEX gives you a way to keep on top of trends in pricing for both energy sources.
That’s about to change. It’s too early to tell how much, or how quickly, but change is coming. The reason? The policies of the Obama Administration.
Two things form the cornerstones of the Obama energy plan: the increased use of green energy sources, and the buildout of a new, “smarter” energy grid. We’re completely in favor of both these plans. Green energy is a necessary and inevitable part of America’s energy future, and the sooner we take that particular plunge, the better. And smart grids will allow this country to enjoy a new age in efficient energy use and a new era of energy cost management.
But getting there is going to cost us.
This is what caught our attention this week: we’ve seen the first in what will be a growing number of articles about utilities requesting rate increases. They’re requesting the increases in anticipation of future costs associated with the buildout of the new grid system.
Last week, there was considerable discussion about President Obama’s plan for a “cap and trade” system to promote green energy use in this country. We’ll be discussing how a cap and trade system works over the next couple of newsletters….it will take more than one, that’s for sure! Cap and trade probably won’t pass Congress this year, but it’s going to happen.
What this means to you. If you think electricity pricing in the current energy market is complex, hang on to your hat, because you ain’t seen nothing yet. The combination of higher transmission and distribution costs associated with the grid buildout, and higher generation costs associated with “cap and trade” and increased green energy use, are going to bring two things to your electric bill: higher costs and increased price volatility. It’s also going to add a new layer of complexity to electric pricing, which means the NYMEX won’t be the same reliable indicator it is today.
Are you going to need more expertise to make intelligent choices? We think so. Are providers going to go to greater lengths to make “apples to apples” plan comparisons difficult? Most likely. Are the great fixed prices and longer contracts we’re being offered right now going to look better and better in the rear view mirror? We wouldn’t bet against it.
It’s possible that 2009 will mark a return to normalcy and the beginning of recovery in the financial sector. But it’s likely that 2009 will also mark the beginning of new turmoil in the cost of your electricity. If the thought occurs that you’d like to add a bit of security to your financial future, give us a call. Because the first signs are already there that the future is a lot closer than you think.