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Energy & Electricity Update for Summer 2024

The recent DOE pause could impact projects past mid-2028. The near-term project queue, which is set to add 10.6 Bcf/day of capacity, is unaffected since these projects have already been approved and have the permits under review.

2024 market update

The impact of the Mountain Valley Pipeline to be completed this year

Following the volatility of 2022, basis pricing has been moving in a favorable direction both for the near-term and further out on the curve for the Northeastern markets. Some of the price movement was in response to the loosening of supply/demand coming off a mild 2023. However, since the permits for MVP were expedited, basis is trading significantly lower (over the past year and a half in particular) and, in most cases, is backwardated through 2028. With the expected growth of gas demand from power burn generation and export capacity, it may make sense to lock in that basis value longer term and create a layered approach for your natural gas purchases.

DR values are primarily driven by capacity prices. Although the PJM enrollment season is closing, it’s worth noting that it is the biggest DR market. PJM DR values are quite low historically, but the next capacity auction results are expected this summer, which could have an impact. DR values in other markets, like New York (especially downstate) and New England, are quite strong (as high as $300k/MW in New York City when participating in both the utility and ISO programs). But it really comes down to the ability and willingness of an organization to curtail load for economic benefit.

A Strategic Load Management service could help you prepare for demand response. It could also help with strategies for reducing on peak load days to help lower your capacity and transmission obligations (i.e. “tags”) and thus your cap and trans costs.

Another option to consider that works with or without participation in DR is NRG’s proprietary Responsive Economic Dispatch (RED) program. This program has no penalties but provides an opportunity for you to earn for what you can curtail.

Always sign fixed price contracts but consider other alternatives based on the current index discount.

If you think about your investment strategy, it’s not really about putting all your money into one financial instrument. The same applies to your investment in electricity and energy. It could benefit you to diversify, especially in a dynamic price market. Concern about switching away from the familiarity and simplicity of a fixed price product is not uncommon. However, you have choices in how you manage your exposure to index pricing when you’re not on a straight fixed price plan that allow you to hedge against rising prices, while capitalizing on low pricing or dips as they occur.

A Load Following Block & Index (or LFBI) product offers the ability to layer energy hedges in percentages of your load—including the ability to execute one or multiple hedges to cover 100% of your requirements and eliminate index exposure. With this product structure, if market prices fall such that the index is no longer attractive, you can fix 100% of your load. We like to call this “enhanced fixed price” by achieving your fixed price in layers, with the option to participate in the index market