POLAR VORTEX 2018
OH NO, IT HAPPENED AGAIN!
Back in October, we were talking about the summer that would never end. Well for those that complained about having to run the AC in October, WELCOME TO WINTER!
It has been nearly two years since the continental US has experiences such a prolonged and pronounced artic cold spell known as a, “Polar Vortex”. Believe it or not, it was snowing in the northern Gulf of Mexico on Jan 2nd. I’m glad I didn’t go on that New Year’s Mexican cruise!
Anyway back in 2015, the phone banks at NJGEC lit up like Christmas trees with business managers seeking advice regarding exploding utility bills. In many cases the impact that the Polar Vortex had on their electricity bills was astronomic (double or triple from the prior year). In the worst cases, annual energy budgets were eclipsed by April. One of the most consistent questions that were asked was, “why did this impact our electric bill so much more than our gas bill?” The answer is quite simple and it actually makes sense. In the past decade the national electric generation fleet has shifted away from coal and nuclear into natural gas fired generation. During extreme cold periods, the sharp increase in space heating, natural gas demand triggers extreme spikes in the spot market driving up the cost of natural gas used by the generation fleet by, 10, 20 and in some cases 100 fold or more. This results in severe spikes in the spot and day-ahead electricity market. Any account that has not properly managed its electricity supply contracts or is on a market based utility tariff will feel the impact of this volatility.
This bitter cold weather that chills us to the bone and causes our automobiles to scream in pain during the early morning warm ups can also wreak havoc on poorly managed energy budgets. In many cases, businesses unknowingly allow 3rd party supply contracts to term out resulting in their accounts being placed in a market based “hold-over rate”. During normal weather conditions, the energy markets can experience prolonged periods of flat or even declining prices, so it is very possible to be in a, ‘hold-over rate” situation for months or even years without noticing a thing only to be blindsided by an extremely high monthly utility bill after an severe weather event.
In most cases, a supplier will make somewhat of an effort to notify clients that their contracts are expiring which is usually by mail and quite often these notices get discarded with the other energy related junk mail. However, there is little incentive for a supplier to continue to attempt to renew a contract due to the fact that in most hold-over rate situations, the supplier will increase its profit margin. This is why it is most important to enlist a professional energy management firm such as NJGEC to manage all energy supply contracts.
If you are not 1000% certain that your energy contracts are up to date and properly managed against the extreme volatility caused by the Polar Vortex of January, 2018, call NJGEC today for a complimentary review of your current utility & supplier situation and avoid the possibility of an unpleasant surprise when you receive your next utility bill.