In today’s AUSenergy News Update: Natural gas futures continue to rise due to cold weather forecasts, New England and the Pacific Northwest experienced the largest power price increases in 2013, and New York Governor Cuomo’s tax reform plan maintains exemptions for delivery sales tax for ESCO customers.
Summary: In the wake of cold weather forecasts for the remainder of January, natural gas futures have continued to rise. Below normal temperatures are expected in the Midwest, East Coast, and even the deep South, and it is expected that the government’s weekly storage report will show a record weekly storage withdrawal on Thursday. Prices have rose nearly 2% during the last couple of days, and are currently 28% higher than a year ago.
AUS Comment: Natural gas customers currently on a variable rate are sure to feel the pain of these rising prices, especially with little sign of any relief from the cold. Though this is not a good time to fix your rate with prices where they are, it does illustrate the value of a fixed rate contract by shielding you from the volatility that surrounds the natural gas market especially during the heating season.
Summary: From 2012 to 2013, wholesale, on-peak electricity prices rose across the U.S. Regionally, the largest increases were seen in the Pacific Northwest, largely due to a dry spring slowing hydroelectric generation and a colder than normal December causing natural gas prices to rise, and New England, where cold weather throughout the winter months, coupled with an inefficient pipeline, caused the chief generation source’s price, natural gas, to rise exponentially. Higher natural gas prices were also responsible for smaller electricity price increases in other parts of the country.
AUS Comment: As more and more electric generation utilizes natural gas, expect to see electricity prices increasingly correlate with the price of natural gas. Given the volatility of natural gas prices, this is further incentive to lock in your energy costs with a fixed rate, and to do so during the non-winter months, when prices are generally lower.
Summary: The latest tax reform plan announced by New York Governor Andrew Cuomo this week maintains the state’s current exemption for delivery sales tax for customers that buy energy from an ESCO. Additionally an elimination of the exemption was not discussed in the governor’s state of the state address. The New York State Tax Reform and Fairness Commission have recommended elimination of the exemption because ESCO’s are now established in the state, making it unnecessary.
AUS Comment: For the time being, New York energy consumers will continue to enjoy tax savings when they purchase through an ESCO. However customers should understand that this exemption is in the crosshairs and could become eliminated in the near future, though many communities have already closed this exemption through local laws. AUS will continue to monitor this situation and how it may impact energy consumers in New York.
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