Winter 2020-2021: Impact on Energy Prices in the Northeast

 

NOAA also released Winter 2020-21 Outlook this month, predicting a mild winter throughout the Northeast. However, each month of this winter, December through February, could have temperature fluctuations that differ from this overall trend, affecting the ISO-New England and PJM markets.

Historically, market-based index and variable electricity products have performed well over the long term, however, in the short term, winter volatility in the Northeast will continue as a result of the same supply/demand issues similar to those that have plagued the market in the past years.

These supply/demand issues stem from constraints moving natural gas into the Northeast through the existing gas pipeline infrastructure in the winter when gas serves the dual purpose of generating much of the region’s electricity as well as heating homes and businesses at the same time.

The flow of gas from Canada into New England is expensive, and the flow of gas from our traditional pipelines into New England is limited and constrained. Thus, current cold weather forecasts will likely play a role in moving prices higher as the colder weather increases the likelihood of increased demand for natural gas.

New England’s power and gas prices are highly correlated to temperatures during the winter months, and natural gas prices are typically expected to rise as demand for natural gas increases from a new generation and more export capabilities. However, there are many steps you can take to manage your energy costs during winter months.

Understanding how energy bills may be impacted by weather patterns or other market influencers, such as the performance of the economy, the market price of generation fuel, supply factors, market regulation is crucial to managing energy costs through continued volatility in the Northeast.  Knowing what options are available that will protect a business is important to understand and can be financially also beneficial to commercial and industrial businesses.

 

Source:
EIA | STEO Supplement: New England Natural Gas Constraints
National Weather Service | Climate Prediction Center
NOAA | Winter 2020-21 Outlook

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