Energy Price Volatility

By Pat McGonagle, Vice President & Chief Financial Officer

We’re amid an energy transition that continues to evolve. While governments and businesses increasingly commit to steep decarbonization targets, energy markets face extreme volatility. This is further driven by geopolitical tensions and a rebound in energy demand. The conflict in Ukraine, as well as other factors, have triggered significant peaks in energy prices in 2022 as uncertainties around supply security and affordability take center stage. This volatility comes at a time when markets are already tight following the COVID rebound.

What is Price Volatility?

Price volatility describes how prices fluctuate based on changes in supply and demand. For our cooperative, this refers to electricity, natural gas and/or propane supply prices, relative to member demand.

What factors contribute to price volatility?

• Weather Changes: Weather is a strong determinant of short-term demand. Unexpected, prolonged or severe changes in weather can cause fluctuations in the amount of product that is demanded by end users. Weather changes also can affect supply and distribution capabilities, which can affect the amount of product that is available for end users.

• Storage Levels: Storage provides the critical buffer between demand and current supply. It is also used as an indicator of the relative supply and demand conditions in the natural gas and propane markets. We need storage during times of high demand, and as a result, market participants may compare current storage levels with current or future demand in evaluating markets.

• Delivery Constraints: Constraints may occur or be removed along the delivery system, which may change supply and distribution capabilities, resulting in fluctuations in the relative amount of available product. Possible examples include operational difficulties, the existence of delivery bottlenecks and the implementation of new transmission routes.

• Market Information: A lack of timely, reliable information regarding the previously mentioned causes of volatility can cause shifts in prices as market participants are forced to base their trading decisions on rumors and speculation.

How does volatility affect consumers?

The impact of price volatility varies among members based on their overall service needs and purchasing practices. Energy Cooperative adheres to a detailed planning model throughout the year to meet our members needs.

The cooperative has several programs that may help as volatility in the energy markets are on the rise.

• Budget Billing: Residential members, whether electric, gas or propane, can stabilize their monthly bills by signing up for a Budget Billing Plan. If you would like to be able to plan your expenses each month and know in advance what your utility bill will be, please consider budget billing. You may sign up by calling our Member Services Department. Certain restrictions apply.

• Metered Propane Service: We continue to focus on providing affordable fixed-price propane with metered service. Our metering option allows members to pay for only the propane they use each month and avoid costly tank refills.

• Refer a friend: Do you know a neighbor, friend or relative that may be looking for a propane supplier this heating season? Please tell them to call our office at 1-800-2556815 and inquire about our introductory rates. Make sure you tell them to reference our referral program, and you will receive a $50 credit to your bill when they pay their first bill.

When the price of energy goes up, you will likely notice it on your bill. However, rest assured, we will continue to work to ensure our prices are fair and affordable. If you have a question about your bill, please do not hesitate to give us a call at 1-800255-6815. One of our member service representatives will be happy to review it with you and help you look for opportunities to save.