Past Newsletter ArticlesUnintended Consequences: The Impact of Overhedging - June 2010 Many organizations that use commodities in their operations employ hedging to control the risk of fluctuating commodity prices. But what if you noticed that your commodity costs, net the cost of your hedge, were going up while the market price of your commodity was going down? This is a sign you may be overhedged. Read More» Emissions Reporting for Energy Users Expected to Grow - June 2010 Greenhouse gas emissions reporting requirements have been established by the Ontario Government. Although the initial impact is narrow, it is seen as a first step toward wide-spread tracking of emissions and their eventual pricing. Read More» Hurricanes and Natural Gas Prices: The Link - June 2010 The production of natural gas may be disrupted by hurricanes that damage or shut down offshore rigs in the Gulf of Mexico. Just expected hurricane activity can exert a noticeable effect on prices long before the hurricanes even form. Read More» Smart Meters and Time-of-Use Rates: Are the Prices as Smart as the Meters? - May 2010 Smart meters will allow Ontario electricity utilities to implement Time-of-Use rates. Consumers are being told these meters will help them to shift their usage pattern and save money. The question is: are consumers getting the right price signal that will allow them to make sound economic conditions? Read More» Buying to Control Price Risk - May 2010 Decisions about locking in energy prices should not be driven by whether the market price is high or low, but whether the price risk is too high. Trying to save money by locking in at the bottom can cost money. Read More» 5 Simple Steps to Effective Energy Buying - April 2010 Energy markets are hybrids of volatile commodity markets and complex regulated utility services. But there are five simple steps energy buyers can take to reduce costs and manage risk in energy procurement. Read More» You're Approaching an Electricity Cost Iceberg - What Should You Do? - April 2010 Over the next 18 to 24 months, the cost of electricity in Ontario is set to rise rapidly. As the electricity cost iceberg approaches, it is essential that consumers understand the hazards so they can navigate safely. Read More» Beware the Electricity Cost Iceberg - March 2010 The Ontario Government's recently announced green levy of $4/year is only a small part of the total increase that typical residential consumers will see on their electricity bills by the end of 2011. It is just the tip of an approaching iceberg. Read More» Moving Marcellus Gas into Ontario - A New Purchasing Opportunity - March 2010 With new extraction techniques, the Marcellus shale formation in the Appalachian Mountains has become one key area of interest for unconventional gas supply. As a result, pipeline companies have been gauging interest in pipeline capacity from Marcellus back to Dawn in Ontario. Read More» Changing Nature of Electricity Demand in Ontario - March 2010 As economic conditions improve, it is uncertain whether demand for power from the industrial sector in Ontario will return to pre-recession levels. It is anticipated that the commercial and residential sectors will become the predominant consumers of power. What might be the impact of this shift? Read More» Global Adjustment: Problem or Symptom? - February 2010 More and more, customers are realizing that while hourly electricity prices have been fairly low since March 2009, the total energy price on their bill - hourly spot price plus the Global Adjustment - has stayed the same or has been rising. This raises a question about whether the Global Adjustment is the problem or a symptom of larger problems. Read More» Basis Changes - A Key Factor in Energy Buying Strategies - February 2010 Until this past autumn, AECO prices tended to be at a large discount to NYMEX prices. This discount has narrowed considerably, with a similar trend observable between AECO prices and those at Dawn in Ontario. Changing basis relationships suggest buyers need to shift their focus when it comes to energy buying strategies. Read More» Samsung's Renewable Energy Deal - Assessing the Cost - February 2010 In January, the Ontario Government announced a deal with Samsung and Korea Electric Power designed to add 2,000 MW of wind and 500 MW of solar power, thereby tripling the province's current fleet of renewable generation. Aegent has undertaken an analysis of the cost of the deal. Read More» Green Power Math - It Adds Up to "Dilution" - November 2009 The Feed-in Tariff will make it tough for green power retailers to compete with the Ontario Power Authority to buy new green generation. For a retailer looking to provide some new and truly incremental green power, a lot of "dilution" is required to make the math work. Read More» The Changing Nature of Alberta Natural Gas Production - November 2009 Alberta's conventional natural gas production has been on the decline, providing incentive for producers to develop new drilling techniques. The new methods have opened up possibilities for provinces other than Alberta. Read More» TransCanada Tolls to Increase Dramatically - November 2009 The mainline tolls for TransCanada PipeLines are set to rise significantly on January 1, 2010 with the cost for firm transportation to Eastern Canada increasing by 38% to about $1.64/GJ. Read More» End of RPP Eligibility Can Be a Good Thing - October 2009 November 1 is scheduled to be the end of RPP eligibility for "designated consumers". On balance, this is a good thing for these customers. For many, the delay in leaving the RPP will have cost them significantly over the past few years. Buyer's Credit Risk from a Supplier's Viewpoint - October 2009 Evaluating a buyer's credit risk is an important task for suppliers, and overlooking this type of risk may turn out to be a very costly move - for both the supplier and the buyer. Ontario Green Power "Brand Management" - October 2009 The Ontario Government is changing the province's green energy landscape. The shift parallels the change in thinking of Stewart Brand, a long-time environmentalist, who now espouses government scale, top-down actions. Read More» Is Now the Time to Buy? - Let's Consider the Question - September 2009 With natural gas prices so low, many energy buyers may be asking if now is the time to buy. The question suggests a strategy based on market view and timing. A buying strategy that depends on locking in "at the right time" to save money is likely to be ineffective in the long run and could even be dangerous. Read More» Global Adjustment Costs: Changing the Allocation - September 2009 The Ontario Energy Board intends to change the allocation of Global Adjustment costs to raise the total cost of on-peak power as compared to off-peak power. The goal is to create an on-peak cost premium large enough to motivate changes to consumer behaviour. Read More» Speculators Play a Key Role in Commodity Markets - August 2009 It is possible the US Government will introduce legislation which would place restrictions on commodity market speculation. Other activities that benefit from speculation could be affected with unintended consequences. Read More» Global Adjustment: Change in Behaviour Has Implications for Hedging - August 2009 The nature of the contracts underlying the Global Adjustment is changing. The result is a change in the relationship between the Adjustment and spot prices. Decisions about hedging will become more complicated. Read More» New Upstream Contracting Requirements for Some Enbridge Customers - August 2009 Recently, the Ontario Energy Board directed Enbridge to put new interim requirements in place for agent-type direct purchase customers using Ontario T-service and Agency Billing and Collection. The requirements apply to upstream transportation arrangements. Read More» Greenhouse Gas Policies: Taking Centre Stage - June 2009 The reduction of greenhouse gas emissions has become a key international issue with numerous initiatives underway on several fronts. From international to regional efforts, there are some common themes emerging. Read More» Are Ontarians Subsidizing Exported Power? - June 2009 Ontario Power Authority contracts with base load generators can contribute to low spot prices. When spot prices are low, exports tend to be high. Subsidies to generators, who directly or indirectly drive exports, range from $3 - 8 million per month, per 100 MW of output. Read More» LNG Imports Grow in Time of Supply Surplus - Why? - June 2009 As the recession continues and natural gas prices remain low, one may question why there is a growth in liquefied natural gas imports by the US - particularly with supplies already exceeding demand. Read More» How Energy Buyers Can Better Enjoy Their Vacation - May 2009 For energy buyers, it can be a stressful return from summer vacation to find that an increase in prices has dashed all chances of meeting the natural gas budget. Before leaving the office for a well deserved holiday, it's worthwhile for energy buyers to add a review of their company's energy hedges and risk profile to their to-do list. Read More» Ontario's Green Energy Act: A Major Shift - May 2009 The Ontario Government's stated intention of the Green Energy Act, 2009 is to encourage the development of renewable energy sources and a culture of energy conservation. The initiatives outlined in the Act and intended to achieve these objectives represent a major shift in policy. This shift has given rise to considerable debate and this is likely to continue. Read More» Coal Phase-Out: What's the Net impact on Costs? - May 2009 Generation supply contracts falling under the Global Adjustment will moderate the net impact of spot price increases arising from the phase-out of coal-fired generation. Over 70% of spot price changes will be dampened. Once coal is completely phased out, the net impact of a $6 to $13/MWh spot price increase will be $2 to $3/MWh on the bottom line. Read More» Coal Phase-Out: Its Impact on the Global Adjustment - April 2009 Natural gas-fired generation plants have the same attributes as coal-fired generation facilities and so will be counted on by the Ontario Power Authority to replace coal. The estimated impact of almost 6,500 MW of natural gas-fired generation replacing an equivalent amount fo coal-fired is an increase of approximately $6/MWh in the Global Adjustment. This is in addition to the effect of the phase-out on spot market prices. Read More» Negative Hourly Electricity Prices - Who Pays in the End? - April 2009 The Ontario electricity market has seen negative hourly spot prices before, but the notable feature of recent experience is how often they occurred from March 28 to April 17. Although persistent negative or otherwise low prices may appear to be a bonanza, they may lead to increased costs for consumers in the longer-term. Read More» Impact of Coal Phase-Out on Ontario Consumers - March 2009 Ontario Power Generation's almost 6,500 MW of coal-fired generation is scheduled to be phased out by the end of 2014. The impact on electricity consumers will be driven by a number of factors. The first is an upward pressure on spot prices as a result of coal-fired generation being replaced with natural gas-fired generation. Read More» Do Price Spikes Really Affect Electricity Consumers? - March 2009 On Februart 18, 2009 Bruce Power had to take one of its generators offline, creating a supply/demand imbalance for a three-hour period. Over this period, prices averaged $1,030/Mwh with the peak being $1,891. Such spikes can often cause alarm but unless sustained, the impact is not as severe as one would expect. Read More» Decline in Drilling and Demand Recovery: How Will They Impact Prices? - March 2009 Typically there is a lag in drilling activity relative to movements in natural gas prices. Current levels of drilling activity may not be sufficient to accommodate the expected increase in demand when the economy recovers. What will be the effect on prices? Read More» Beware of News Reports When Assessing the Forward Market - February 2009 Over the past year we have seen two ends of a market cycle - a bull and a bear. News reports have provided explanations for price behaviour that have run the full gamut. But lessons learned suggest energy buyers should not be carried away by sensationalism in the press, and should not overlook their business objectives. Read More» Why Pay a Consultant for Energy Advice When Suppliers Offer It for Free? - February 2009 In challenging economic times, it can seem counter-intuitive to add to your energy costs by hiring an outside energy consultant. However, leveraging the knowledge of an energy advisor rather than a supplier can be an efficient way to develop cost reduction strategies for your energy supply. Read More» Larger Electricity Consumers Better Off Outside the Regulated Price Plan - January 2009 Larger electricity consumers should be happy they will no longer be eligible for the Regulated Price Plan as of May 1, 2009. Their cost of electricity will come down and their risk will be no higher than if they were still on the RPP. Read More» End of OPG Rebate Is Approaching - How Will Consumers Be Affected? - January 2009 The OPG Rebate is scheduled to end on April 30, 2009. When the rebate ends, consumers will see their net cost of electricity rise as will their exposure to spot market prices. Revisiting hedging strategies will be the order of the day. Read More» Create a Fire Prevention Plan for Energy Buying - January 2009 In mid-2008, many natural gas buyers were in full fire-fighting mode. But the drop in energy prices, and the prospect for soft prices for the next while have created an ideal opportunity for organizations to create a fire prevention plan for energy buying. Read More» Financial Professionals Are Key Players in the Energy Buying Team - November 2008 For some organizations, the large share of operating costs that energy represents, combined with the uncertainty inherent in energy prices, means energy inputs have the potential to add significant uncertainty to profitability. Anything that makes profitability less certain ought to attract the attention of the Chief Financial Officer. Read More» When Is It a Good Time to Hedge? - November 2008 A Market Timing Strategy Won't Minimize Price - November 2008 "Lone Wolf" Behaviour- A Risky Move in Energy Buying- October 2008 Following an election that was disappointing for the Liberal Party of Canada, Mr. Dion is being criticized for acting as a "lone wolf" in deciding his party's policy theme for the election against the advice of his caucus and policy experts. The stakes were high, and the gambit failed. Lone wolf energy buying behaviour also carries high stakes. Read More» Develop a "SMART" Goal for Your Energy Procurement Plan - October 2008 Commodity markets tend to bring out the competitive nature in people. Everyone wants to "beat" the market and the rush of doing so can be addictive, more addictive than the pain of losing to the market. But when a speculative position is taken the likelihood of either outcome is about the same. Developing a "SMART" goal is a critical first step in an energy procurement plan. Read More» What is the Cost of Managing Energy Price Risk? - October 2008 We often say that cost reduction and risk reduction are at opposite ends of a spectrum when it comes to energy buying. This implies that risk reduction costs something. Is this true? What is the cost of energy price risk managment? Read More» Involving Students in Energy Conservation - October 2008 The York Catholic District School Board's Eco Champion Program demonstrates the effectiveness that involving energy users in conservation efforts. Read More» Don't Get Harpooned in a Retail Power Deal- September 2008 In the broad sales world, a "whale" is a customer that yields a high commission or margin. It follows then that one way for buyers (of anything) to minimize costs is to avoid getting harpooned. How can you avoid getting "harpooned" by an electricity retailer? Read More» Ontario's Near-Term Electricity Shelf Well-Stocked- September 2008 The supply-demand picture for electricity is a key consideration for those thinking about hedging their future price for power. For 2009, the Ontario picture is much more favourable than it has been in the past. Read More» Contracting Wisely for T1 Can Reduce Costs- September 2008 The T1 semi-unbundled service offered by Union Gas provides larger gas users with the chance to reduce costs on distribution, but only if they contract wisely. Customers too often "over-contract" for T1 and miss a chance to reduce their costs. OEB Consults on Low Income Energy Consumer Issues- September 2008 The Ontario Energy Board is consulting with stakeholders on issues concerning low income energy consumers and their use of natural gas and electricity. The discussion has attracted a broad range of interests including large-volume consumers. Read More» Managing Cost and Risk with a Supplier Portfolio- August 2008 For commodities such as natural gas a strong relationship with a single supplier doesn't lead to improvements in cost or quality. In the worst case, using a single natural gas supplier can create financial risk. Read More» Day Ahead Markets- August 2008 While natural gas operates on a day ahead market, power market prices change every five minutes throughout the day. The timing difference between the purchase of gas and the sale of power can present a substantial challenge for power generators. Read More» Key Considerations for CESOP- August 2008 With its Clean Energy Standard Offer Program (CESOP), the Ontario Power Authority has set the competitive bar high. In a continuation of our discussion from our June 2008 newsletter, we explore key considerations affecting the financial competitiveness of prospective projects. Read More»
Do Real Interest Rates Influence Commodity Prices? - July 2008 With rising commodity prices come theories of what causes the price increase. A common theory is that a decline in real interest rates (interest rates adjusted for inflation) will prompt investors to forego bonds and invest in commodities, resulting in higher demand for these products and thus, higher prices.
Retail Electricity Contracts: Do They Reduce Risk? - July 2008 Climate change policy has been a hot subject in the news lately. As Federal and Provincial governments each weigh in with their own policies, it can become a challenge to keep track of how these policies impact our businesses. In this article, we discuss the various policies and the potential impact on consumers. Read More» The Role of LNG in North American Markets - June 2008 Liquefied Natural Gas can benefit consumers and suppliers as it allows for natural gas to reach destinations that would be unreachable with conventional pipelines. Key Considerations for CESOP and CHP - June 2008 If your organization is considering participation in the Ontario Power Authority's Combined Heat and Power (CHPII) request for proposal or the Clean Energy Standard Offer Program (CESOP), you need to give careful consideration to key elements of your gas supply strategy before you submit your proposal. Careful planning before submitting your proposal can ensure that you have taken full advantage of the OPA programs to manage your risks. Read More» Bid/Ask Spreads: Why is the Price Higher When We Buy Versus When We Sell? - May 2008 We've seen it happen on vacation. You pay one price when you buy a foreign currency then you get a lower price when you sell it back. But as experienced travellers, we've learned that there are better places and times to exchange your currency to avoid paying too much. What drives buy/sell spreads in the gas market? Read More» Oil & Natural Gas: Are the Prices Linked? - May 2008 There has been an ongoing debate surrounding the relationship between the price of natural gas and the price of oil. What's behind this theory and how does it stand up to historical pricing data? Read More» Coal Replacement - Implied Carbon Cost - April 2008 The Ontario government has introduced legislation that all coal generation must be out of service by 2014. The shortfall in generation needed to serve Ontarians will be made up through conservation efforts and gas-fired, nuclear and renewable energy generation. With British Columbia's introduction of a carbon tax recently making headlines, how does Ontario's coal replacement initiative compare in its impact on consumers? Read More» Knowledge Monopolies: What You Don't Know Can Cost You - March 2008 Why is it that many of us distrust the mechanic when our car is getting serviced? Often we fear that we are being overcharged, or duped into paying more for unnecessary work. At the root of the problem is the fact that the mechanic knows more about the situation than we do. "Knowledge monopolies" exist in many fields, including the energy industry. Generally, those selling energy have more information about the situation than energy buyers. Read More» Explaining the Global Adjustment, Part 1 - March 2008 The Global Adjustment is not well understood by many consumers, yet this mechanism has a large and growing impact on the true cost of electricity that you use. Read More» Explaining the Global Adjustment, Part 2 - April 2008 In a continuation of our article explaining the Global Adjustment and the role it plays in electricity prices, this month's article discusses the impact of conservation and demand management (CDM) on the Global Adjustment and ultimately, your electricity bill. Read More» Planning Your Energy Budget - February 2008 For many organizations, developing an annual energy budget can be perplexing. However, with the proper approach an effective energy budget can be developed. Read More» Are You Ready to Leave the Regulated Rate Plan? - February 2008 Some municipalities, school boards and hospitals who have been in the Regulated Rate Plan feel that their organization will be hurt if they leave the RRP. However, the protection offered by the RRP to large consumers is a myth. Read More» |
Insights
A competitive supplier portfolio saves moneySome energy buyers have been buying from the same supplier for years. "I know my marketer always gives me the market price," is something we often hear from buyers. But it pays to have a portfolio of suppliers. In one recent transaction, by checking the seller's price against the market, Aegent saved the buyer over $40,000.Read More» Subscribe to Aegent Energy Update
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