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In This Issue

Report: New England Region Is at Great Risk of Higher Energy Costs

State Urges Federal Agency to Impose Cost Caps on Transmission Projects

Natural Gas and Oil Market Update

EIA - Weekly Natural Gas Storage Report

NYMEX Natural Gas Week-to-Week Price Change

Natural Gas Futures - Five Year Price


NOAA 6 to 10 Day Outlook
Color indicates the probability of forecasted temperatures being above or below a historical average for the period.


Market Overviews

Report: New England Region Is at Great Risk of Higher Energy Costs

Energy Manager Today | October 13, 2016

New England has among the highest natural gas and electricity prices in the nation: Energy infrastructure constraints reportedly already have cost the region an extra $7.5 billion over the past three winters, alone. And now, based on the findings of a new study sponsored and released by the New England Coalition for Affordable Energy, things are about to get worse.

The research paper, New England Energy Landscape Update, finds that the region is at greater risk of higher energy costs and price volatility than estimated a year ago,

Conducted on behalf of the Boston-based advocacy coalition by the consulting firm, Daymark Energy Advisors, the study found that recent delays and cancellations of energy projects in the region combined with new energy policies could have greater adverse economic consequences through 2020 than previously estimated.

The study, sponsored by business and industry associations in Connecticut, Massachusetts, and New Hampshire; assessed energy marketplace changes that have occurred since August 2015. At that time, Daymark, in cooperation with Economic Development Research Group, found that failure to expand the region’s energy infrastructure – natural gas pipelines, electricity transmission lines and electricity generation – could lead to $5.4 billion in higher energy costs to the region by 2020.

The researchers also found that the higher energy costs could result in a reduction in disposable income of $12.5 billion, and over 167,000 jobs lost or not created, mostly in 2019 and 2020.

“It is fair to say that the current energy landscape in New England is in flux and there is a higher degree of uncertainty than a year ago regarding outcomes over the next three to five years and beyond,” said Daymark President Marc Montalvo.

According to the researchers, three changes to New England’s energy landscape over the past year that have resulted n greater uncertainty about the timing and composition of needed energy infrastructure include:

  • State clean energy policies have led to unintended economic challenges to wholesale electricity markets;
  • Electricity market drivers, such as installed costs and fuel prices, have affected generation resources and costs; and
  • Natural gas infrastructure has either been delayed or cancelled.

Given the level of uncertainty highlighted in the report, Daymark recommends a regional planning strategy that looks at state-by-state actions through an integrated approach covering electric supply reliability, environmental goal achievement; and the cost impacts of electricity and natural gas on the region’s economic outlook and competitiveness.

The report also recommends a two-step process for regional planning that would consider economic, environmental, and reliability impacts over the near-term; defined as the next five to ten years, as well as over the longer-term defined by the outer limits of policies and legislation to address climate change.

“The report – and a recent warning by ISO New England that the electric system may become unsustainable during extreme cold weather due to energy supply constraints – [represent] stark reminders that events of the past year put the region’s economy and competitiveness in an increasingly perilous position as we approach 2020,” said coalition spokesperson Carl Gustin. “Timely actions to add new energy infrastructure and address energy market uncertainties are needed.”

Energy affordability remains a key concern in New England. A coalition survey conducted earlier this year found that nearly nine out of ten consumers are concerned. A business survey also revealed that nearly 80 percent of respondents are concerned about reliability of energy supplies during periods of high demand; and 86 percent said energy costs are important to their business success.

In closing, the report states, “Policy developments over the past year in New England and adjacent regions to address infrastructure needs have introduced additional uncertainty to the timing and composition of infrastructure additions to the regions over the next five years. This uncertainty translates into greater electricity price uncertainty and the potential for greater adverse jobs and disposable income impacts for New England consumers and businesses in the 2019-2020 period and years immediately following, as compared to the estimates in the August 2015 report. Overall affordability and price volatility remain important issues in the next three to five years.”

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State Urges Federal Agency to Impose Cost Caps on Transmission Projects

NJ Sportlight | October 13, 2016

Large energy companies, utilities increasingly look to transmission to drive profits. Without caps, cost overruns can be passed along to customers

With new transmission projects boosting what consumers pay for electricity, state regulators and others are pressing for a federal agency to rein in costs for modernizing the electricity grid.

In comments submitted to the Federal Energy Regulatory Commission, New Jersey joined other states in urging the agency to impose cost caps on projects put out to competitive bid to build high-voltage transmission lines.

The issue has emerged as utilities in the state and across the nation are under increasing pressure to modernize the electric grid to make it more reliable against severe weather and better able to accommodate cleaner technologies designed to provide power to customers through solar and wind systems.

New Jersey Board of Public Utilities president Richard Mroz has been outspoken in calling on the federal agency to focus more closely on cost impact to consumers when looking at new transmission projects, a point the state emphasized in comments submitted to FERC earlier this month along with Delaware and Maryland regulators.

They recommended the “ultimate cost to customers should be a factor considered in the evaluation process.’’ In particular, the states, along with an independent monitor associated with PJM Interconnection, argued cost-containment provisions must include hard cost caps.

The problem arose when PJM, which operates the regional power grid, awarded its first competitively bid project to a combination of companies, including New Jersey-based Public Service Electric & Gas. The estimated cost for building a new transmission project from its nuclear power complex at Artificial Island more than doubled from its original bid, leading PJM to suspend the proposal this past August.

“Without cost caps, there is no effective incentive to bid competitively,’’ wrote Jeffrey Mayes, general counsel for the Independent Market Monitor for PJM, which assesses the competitiveness of the nation’s largest power grid from the Eastern Seaboard to Illinois.

“Cost caps place the risk of overruns on project developers, the parties most capable of managing such risks.’’ Mayes continued. “Customers have no ability to manage development risks and should be insulated from such risks.’’

FERC is responsible for overseeing what developers get for transmission projects, including rates of return, which are typically much higher than what utilities get for more localized distribution projects overseen by state regulators. As a result, transmission has become a more lucrative part of the utility business.

Big integrated energy companies that own power fleets as well as utilities have increasingly become more reliant on transmission to drive profitability as earnings from generation have declined in recent years with lower electricity prices. In some cases, transmission can account for up to 40 percent of a customer’s bill.

In their comments, New Jersey and other states also urged other restraints on costs involving transmission projects that are competitively bid. Among those was eliminating a provision allowing utilities that are part of a transmission system to receive added incentives for building a project within that system.

In its comments, PSE&G advocated against using cost caps, instead using more effective measures, including examining a developer’s track record in delivering projects on schedule and under budget.

Read More:

Natural Gas and Oil Market Update


Natural Gas Prices Hit One-Year High

The Wall Street Journal | October 14, 2016

Natural gas prices surged to a one-year high following federal data that showed a surprisingly small addition to stockpiles last week.

Natural gas futures for November delivery settled up 13.1 cents, or 4.08%, to $3.34 a million British thermal units on the New York Mercantile Exchange.

The EIA reported that natural gas stockpiles grew by 79 billion cubic feet last week, compared with the 85 billion cubic feet expected by forecasters surveyed by The Wall Street Journal. The report is a widely watched measure of supply and demand. A smaller-than-expected addition to storage likely indicates smaller supply or greater demand than expected.


Oil Slips Below $52 as Abundant Supplies Weigh

Reuters | October 14, 2016

Oil slipped below $52 a barrel on Friday, giving up an earlier gain, as abundant crude supplies outweighed tighter U.S. fuel inventories and OPEC’s plans to cut output.

Brent crude reached a 2016 high near $54 on Monday, underpinned by OPEC’s Sept. 28 deal to reduce oil production, before weakening on rising U.S. crude stocks and as the Organization of the Petroleum Exporting Countries’ own numbers showed output is still rising.

Global benchmark Brent LCOc1 was down 4 cents at $51.99 at 1328 GMT (0928 EDT), having traded as high as $52.55 earlier. U.S. crude CLc1 gained 20 cents to $50.64.

EIA - Weekly Natural Gas Storage Report

EIA - Weekly Natural Gas Storage Report

Working gas in storage was 3,759 Bcf as of Friday, October 7, 2016, according to EIA estimates. This represents a net increase of 79 Bcf from the previous week. Stocks were 56 Bcf higher than last year at this time and 192 Bcf above the five-year average of 3,567 Bcf. At 3,759 Bcf, total working gas is above the five-year historical range.

NYMEX Natural Gas Week-to-Week Price Change NYMEX Natural Gas Week-to-Week Price Change

Natural Gas Futures - Five Year Price ($ per mmBtu)

NYMEX Natural Gas Week-to-Week Price Change - Five Yearly Snapshot

Disclaimer: The information contained in these reports is gathered from public and/or internal sources and is presented solely for the convenience of our customers and Newsletter Subscribers. Patriot Energy Group makes no representation or warranty, express or implied as to the accuracy or completeness of the information set forth in this newsletter, and Patriot Energy shall not have any liability to any person or entity resulting from use of this information in any way.
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