May 2025 Volume 7

ENERGY

At the same time, U.S. gas production has stagnated. When natural gas prices reached rock bottom in the spring of 2024, production and exploration for gas decreased. Following eight consecutive years of steady growth, we’ve seen a decline in production over the past year:

While the fuel costs to generate electricity continue to rise, demand for power is also on an upward trajectory. New data centers are appearing across the country that host energy-intensive AI technology. There are serious concerns that load growth will substantially outpace the ability of supply to keep up over the next two years. Yes, we’ve heard news of large tech companies looking to rely more heavily on renewables or nuclear power, but wind and solar are intermittent resources and utility-scale nuclear power plants typically take 5-10 years to build with immense capital investment. What Is the Best Solution for My Business Moving Forward? The most prudent solution is to begin actively reducing medium to-long term exposure to price risk. As summer approaches, there will be increasing fears of growing energy consumption nationally – and with them price pressures – based on cooling needs. And continued LNG export growth is likely to cause shortage concerns and more volatile prices. At Transparent Energy we recognize the dangers of scarcity risk premiums finding their way into the wholesale energy markets, and the impact it could have on our client’s bottom lines. We do not see any meaningful relief for prices in 2025 or 2026, and the opportunity to lock in rates for 2027 and beyond is unlikely to get much more attractive than where those strips are trading today. Now is the time to act. If you are concerned about rising energy prices and their impact on your business, contact our Transparent Energy energy procurement expert today ngardner@transparentedge.com. Nancy Gardner Transparent Energy Email: ngardner@transparentedge.com Phone: 732-288-5126

The EIA is forecasting the return of production growth over the next two years; however, the increase pales in comparison to the expected rise in exports. Natural gas production companies have made it clear that they are only willing to pull more gas out of the ground when prices meet their acceptable level. What is acceptable? A recent survey of energy companies suggested that the average price needed to incentivize new natural gas drilling was $4.66 per MMBtu – again, higher than today’s prices. Ok, So Natural Gas Prices are Moving Higher, Does This Affect My Electric Bill as Well? YES! Electricity prices across the country are driven by the cost of natural gas.

Source: EIA There is a >90% correlation between the price of natural gas and electricity rates across ERCOT, PJM, MISO, NYISO, and ISO-NE, and natural gas consumption in the power generation sector has never been higher.

FIA MAGAZINE | MAY 2025 7