The Kobiona Monitor

Volume 1 / Number 4
March 14, 2019

Kobiona’s leadership has enlisted the help of our Market Intelligence Desk to craft this monthly
publication to share major market dynamics impacting future power and gas prices. As every
client’s situation is unique, we encourage you to review market movements with us to decide
whether any action on your part could serve to lower your future costs or avoid known,
coming increases.

 

Weather
In terms of Heating Degree Days (HDDs), one of the key measures by which winters are ranked, Winter 2018/19 (Dec-Jan-Feb) came in very close to the 30 year average (2605) at 2513.51 HDDs. For reference, the coldest winter on record was Winter 1978/79 (3072 HDDs) and the warmest was Winter 2015/16 (2248 HDDs). You may recall in 2016 we witnessed a large natural gas surplus driving the lowest forward power prices of the last 20 years.

Winter 2018/19 was the 16th warmest winter since 1950.

 


Natural Gas

Natural gas is now the primary fuel source for power plants across the country and throughout New England. As gas prices often closely correlate to power futures, we monitor natural gas supply and demand fundamentals closely.

Prompt Month Prices
NYMEX prompt month trading has rebounded, modestly, from breaking the $2.60/MMBTU floor in early February. At close of trading on Thursday, March 14th, the NYMEX prompt settled at $2.85/MMBTU. In the past 24 months we have see a very strong resistance point at $2.60. Therefore we define the range within 10% of $2.60 a “strong value buy.” $2.85 is 9.6% above $2.60, making this an optimal time to secure both gas and power futures.


Dry Natural Gas Storage: Deficit Widens
The EIA’s March 14th Weekly Storage Report (for the week ending March 8th) reported inventories of 1186 Bcf, 359 Bcf less than this week last year and 569 Bcf below the five-year average of 1,755 Bcf, but still within the five-year historical range. That means the storage deficit to the five-year average has widened from the 18-20% we saw through the last six months of 2018, a bullish sign for gas and power futures. A reminder that in the past three years – 2016, 2017, and 2018 – the best days to buy forward power contracts were all in Q1.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Great Eastern Files for Bankruptcy, Customers Dropped to Default Service in Winter
In early February, Great Eastern Energy, a mid-sized competitive retail supplier serving customers in New England, New York and parts of PJM (the MidAtlantic) filed for bankruptcy. Most of their customers were dropped back to utility default service during the most expensive time of the year, when rates in most of Massachusetts, for example, are close to $.19/kWh for supply alone.


We would never be so bold to say this could never happen to a supplier in our portfolio. Financial climates shift and put pressures on even the most well-run companies. But when we interviewed Great Eastern we had strong concerns about their long-term viability based on their pricing methodologies and elected not to invite them into our elite supplier portfolio.

At Kobiona we closely scrutinize  quarterly and annual earnings releases from our suppliers — and their parent companies — in an effort to identify coming potential risk. Our business would be as damaged as our customers’ should something like this occur.

If your company or an organization you know has been negatively impacted by Great Eastern’s bankruptcy, please reach out or introduce us.

 


Economic Insight: Job Growth Slow Down

The U.S. economy added only 20,000 jobs in February, far below economists’ estimates of 180,000 and a potentially bearish signal of labor tightening or GDP slowdown. The Unemployment Rate dropped from 4% to 3.8%, and the economy also saw the largest wage growth in over a decade at 3.4%.

 

 

 

Introducing: Utility Bill Audit and Reconciliation (New Service)
As you might imagine, lots of utility bills come across our desks! Our staff began to notice a number of different types of errors and discrepancies on our clients’ bills. When we dug deeper, it became clear these erroneous or excessive charges ranged from $1,000 to over $45,000 on an annual basis, most of which went unnoticed by our customers for years.

Since we’re in the business of cost and risk management, Kobiona has formerly launched a new business line performing utility bill auditing and reconciliation on our customers’ behalf, carefully reviewing their bills and negotiating refunds and price adjustments with the utilities.

If you are concerned you could be overpaying on your utility bills, please reach out for more information!

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Questions?
For those tasked with procuring power and gas for the first time — or the tenth time — the industry can seem overwhelming with densely-technical and sometimes conflicting information.

We welcome your questions on how to apply our observations, as well as your feedback on The Kobiona Monitor. Please share how we can make this publication more useful by calling us on 844-209-7972, or contacting us via email, info@kobiona.com.