Preparing for El Nino
Jan 8, 2024

Many of us are aware of the weather phenomenon called El Nino. It refers to a climatic cycle that occurs in the Pacific Ocean and affects weather patterns worldwide. El Nino is a climatic cycle characterized by warmer-than-usual sea surface temperatures in the Pacific Ocean, especially around the equatorial region. According to the World Meteorological Organization (WMO), scientists predict that there is a 90% chance that next El Nino will occur this winter and continue through at least April 2024. This event can cause wide-ranging effects on various industries, including the energy and utilities sector.

Supply concerns

One of the most significant threats of an El Nino winter is the increased risk of floods and storm surges. Storms and hurricanes are more frequent during El Nino, which can result in infrastructure damage and power outages. Power outages can affect the energy and utilities sector, as it can impact energy production and infrastructure damage can cause significant repair costs.

Another impact of the 2024 El Nino winter on the energy and utilities sector will be the challenges faced by renewable energy sources. Renewable energy sources such as wind and solar power generate electricity based on weather conditions.  This decrease in renewable energy availability can create challenges for companies to meet their energy production targets.

Decreased demand

Temperature fluctuations are a major factor affecting utility bills during El Nino winters. This El Nino event is predicted to have a significant impact on natural gas prices. Warmer temperatures will decrease demand for natural gas as it will be used less for heating, which may lead to a decrease in prices. However, reduced natural gas supply due to extreme weather events such as flooding can cause an increase in pricing. In the U.S., natural gas is a common source of energy for heating homes, and gas prices could see some volatility due to changes in demand and supply. Monitoring natural gas prices closely will be key to managing energy costs.

The 2024 El Nino winter is expected to bring significant changes to our energy consumption patterns and utility bills.  Since these changes are inevitable, it is crucial to be prepared and make smart decisions to mitigate the impacts. By monitoring temperature changes, installing backup power sources, and reviewing pricing plans, you can manage the energy costs during this event. An energy contract with 100% swing  can protect you against usage fluctuations and costly cash-outs.  With careful planning, you can keep your utility bills under control and keep your finances on track.

Are you risk averse or risk tolerant? We can help you achieve budget confidence through a 100% fixed, 100% swing contract, or help you strategically benefit from the changing market through a calculated hedging strategy.  Either way, AUS is watching the market so you don’t have to.  Call 800-392-4287 for a strategy session.

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