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Fall 2013 Issue 12

Welcome to Howell Energy Consulting  

Howell Energy Consulting brings you the opportunity to focus on the core mission of your business, while allowing an energy professional to create competition for your electricity and natural gas requirements through managed procurement.

Howell Energy Consulting is a licensed energy professional in Connecticut and Massachusetts. For more information :

phone: 860-205-3863
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Energy Price Outlook  



Another summer that went by to fast!  Vacations and the long days slow down the pace of everything.  Even energy markets seem more calm. With the exception of a couple of volatile days this past summer a CL&P Rate 30 customer could have executed a new 12 month contract within a range of $.003 KWh. Not a lot of movement. 


On any given day this past summer the direction of the power market was determined by the latest 12 -14 day weather outlook. The hotter the weather forecast, the higher prices have trended. 


Underlying this steady market was the better than expected  reduction of the natural gas storage deficit relative to last year and the five year average . At the beginning of the summer the deficit relative to last year was 587 Bcf but as of the week ending September 6th, the deficit had been reduced to 172 Bcf. Relative to the five year average a deficit has been turned around to a small surplus of 46 Bcf. To see how the deficit is being erased see the graphic shown below (Graph B).   


By the end of the injection season the EIA projects storage to be just above the 5 Year Average at 3,800 Bcf. The record set last year was 3,926 Bcf.  As a result higher prices than last year will be supported throughout the winter. 


Overall what the market is telling us is that supply and demand are relatively in balance for now. As the weather outlook changes traders are bidding up prices or selling off volumes. If the market was unambiguously headed higher or lower we would be discussing supply or demand issues (See Graph A below).



Natural Gas Transportation 


There have been some developments over the summer that will affect natural gas transportation. The good news is that the Deep Panuke wells off the coast of Nova Scotia came on line in late August. This northern supply will provide gas to the northern end of New England's interstate pipeline system reducing the demand on southern capacity. To the bad, Entergy, the New Orleans based company that runs the Vermont Yankee nuclear power plant, announced that it would be closing the plant during the next year.  While there is plenty of generating capacity in New England, the shortfall is likely to made up by natural gas fueled generating plants.  As discussed in the sidebar the market had an immediate reaction that hopefully will ease as the timing and implications  of the closing of Vermont Yankee are fleshed out. 


Overall Outlook and Wildcards:


While the overall outlook calls for steady prices, there are two elements that could cause prices to go higher. The first is the potential for hurricanes to disrupt supply. While there have not been any major storms yet this year, the hurricane season does not end until November 30th so there is plenty of time left before the all clear can be sounded.  From Hurricane season the concern then turns to winter weather and the capacity of the interstate pipelines to supply the winter.  Should New England have another episode like we did last December when generators could not get natural gas to serve their units, the cost of gas transportation will spike and the spike will be reflected in power and natural gas prices until additional natural gas pipeline capacity is expanded. 


Possible strategies include:

  • New natural gas pipeline capacity will not be added until 2016 at the earliest. Your energy plans should at least take you to 2016. As things stand today any price around  8 cents/KWh should be considered very desirable.  
  • If you are concerned that the market is trending higher you may want to leapfrog the next CL&P and UI reset by buying now at a price close to the current Generation Service Charge.
  • Avoid variable prices but consider a series of short term fixed price agreements.  The market is weakest in the front months and higher in the back months due to storage and interstate natural gas pipeline concerns. 
To understand how these strategies apply to your business call Howell Energy Consulting to create a procurement plan for your organization.

  Graph A 

  NG F-13


Graph B

  stor sep 6

About Derek Howell 

With over 30 years in the energy industry and 13 years of experience in the deregulated energy business, Derek Howell's expertise covers the broad expanse of the electricity and natural gas markets.  


Prior to the founding of Howell Energy Consulting. Mr. Howell  was Direct Energy's Director of Retail Pricing for  New England and New York regions. 


In This Issue
Energy Price Outlook
Vermont Yankee to Close
On the Distribution Side

Vermont Yankee to Close 


On August 27th Entergy, the operator of the Vermont Yankee nuclear power plant, announced that it would close the 605 MW facility. Vermont Yankee began service in 1972 four years after Connecticut Yankee.  
Remarkably just two years ago, Entergy had received a license extension for the Vermont Yankee plant that could have kept the plant in service until 2032.  So the closure of the plant came as a bit of a surprise. 
In its statement on the closure, Entergy management sited high maintenance costs, low natural gas costs and rules regarding capacity payments in New England that did not recognize the value of diversity in the generation mix.  
On this last item Entergy did have a point. It is likely that natural gas powered generation  will fill the hole left by Vermont Yankee. While the announcement did not have any impact on the commodity price of natural gas, it did have an impact on the cost of natural gas transportation. In a market where natural gas pipeline capacity does not fall below 80% adding additional demand had a predictable effect.
On August 28th the day after the announced closing of Vermont Yankee, the cost of natural gas transportation for the Winter 2013 -2014 went up 25% and for the Winter of 2014-2015 when the plant is likely to be off line, the cost went up 68%! 
There is one other possibility and that is for the completion of  a new transmission line from Hydro-Quebec. This new line will add 1,200 MW of capacity to New England. The anticipated completion of this project has not been announced but possibly the closing of Vermont Yankee will facilitate progress on this line.
Hopefully traders will think through the implications further because the increases shown in the immediate wake of the announcement appear to be to high.




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On the Distribution Side


There is mixed news on the distribution rate side. On the one hand customers may experience a rate decrease due to a change in the amount of money that distribution companies like CL&P and UI can earn on investments in transmission assets. On the other hand the potential rate change due to ISO NE's winter reliability issues (see the discussion presented in the Summer 2013 Newsletter) may be getting more expensive. More details on these two issues are discussed below.


Transmission Rate of Return


On August 6th a Federal Administrative law judge reset the rate of return that New England Utilities could earn on transmission projects from 11.14% to 9.2%. The Hartford Courant reported on August 7th that the savings could be in the $30-$40 million dollar range for Connecticut consumers. For most business customers transmission charges are billed as a demand rate so the impact on bills is somewhat uncertain until the distribution of the funds is clarified. Simply dividing the estimate by 1.6 million Connecticut customers would mean a savings of roughly $18- $25 a customer.


ISO NE Winter Reliability Program


In the Summer 2013 newsletter   the ISO NE winter reliability issue was covered.  To recap during very cold days when the interstate pipeline is constrained some power plants that had committed to generate that day did not because they were unable to obtain natural gas. On the coldest day the priority is provide residential and commercial heating customers first. 


To protect the New England grid from having to take more drastic measures, ISO NE would like to keep on standby generators that can use oil or natural gas. Keeping an inventory of oil on hand is expensive and risky so ISO NE would like to compensate these dual fuel generators. The cost of this compensation would fall on consumers.


ISO NE set up an initial  auction to see who would participate in the Winter Reliability Program. The amount of generation that  was bid that day was short of expectations so ISO NE and its participating generators tweaked the auction rules and asked for new bids. 


Restructuring  Today on 9-11-13 announced the results of this second auction. In this auction ISO NE proposed to purchase 2.29 billion KWh for $114.3 million.  For the 7 million New England customers this would be an average cost of $16. As plans stand now this charge would be recovered through the customer's distribution bill. 


So on net the impact of the drop in the Transmission Rate of return may provide slightly more savings to New England customers than the ISO NE reliability program may cost. 



If you would like Howell Energy Consulting to perform this review for you please contact me at or via phone at 860-205-3863.



To learn more about Howell Energy Consulting Go to:
Derek Howell
Howell EnergyConsulting LLC