Natural Gas Prices Drop

The New York Mercantile Exchange (NYMEX) month-end settlement price for August was $3.651 per Mcf, down from $4.774 at the end of July.  This means that Dominion East Ohio’s Standard Choice Offer (SCO) rate for residential customers will decrease from $5.974 per Mcf for August 16 to September 15 to $4.851 per Mcf for September 16 through October 15.  For more information, see John Funk’s article in the Plain Dealer: Natural gas prices hit lowest point in 11 months

In John Funk’s conclusion, he states:

“For now, at least, the situation means that consumers should consider staying with a monthly variable price rather than sign a contract for a long-term, fixed price from an independent gas supplier.”

We agree with John Funk.  For Dominion East Ohio customers, the lowest 12-month fixed price shown on the PUCO’s Apples-to-Apples website is $6.73, offered by Constellation NewEnergy.  The other marketers have prices between $6.99 and $8.99 for 12 to 60 months.

The NYMEX 12-month strip (the average price of futures contracts for the next 12 months) on August 27th was $4.27.  It hasn’t been this low since December 2002.  At that time, marketers were offering prices well under $5 per Mcf.  Unless we see prices drop below $5.50 for a 12-month fixed contract, we recommend staying where you are.

On Wednesday, August 25th, the Public Utilities Commission of Ohio (PUCO) approved, with modifications, a FirstEnergy rate proposal for the 3-year period beginning on June 1, 2011.  When the PUCO modifies a proposed electric security plan (ESP), the utility has the right to withdraw its proposal.  We will have to wait and see what FirstEnergy decides to do.  In addition, any parties who oppose the PUCO ruling have until September 24th to file an application for rehearing.  Therefore, the plan is not yet final.

The rate plan calls for a series of auctions to set the default generation prices.  The PUCO ruling states that the first auction should be held in October.

For more information, see John Funk’s article in the Plain Dealer: PUCO approves rate plan for FirstEnergy

We recommend that you attend:

• 5th Annual Northern Ohio Energy Management Conference

• Wednesday, September 29, 2010

• John S. Knight Convention Center, Akron, Ohio

For more information, see www.MECseminars.com.

We are working with a McDonald’s restaurant in Tallmadge, Ohio to install LED lighting.  The results of testing from the first phase are shown in the presentation called LED Lighting Project on our Presentations & Reports page.

Currently, Illuminating Company customers are paying for past construction costs for generation plants under a rider called the Regulatory Transition Charge.  This rider is scheduled to expire on December 31, 2010.  Thus, for purposes of budgeting for 2011, you may assume that your electric costs will decrease by the amounts shown below, based upon your rate schedule.

• Residential: 1.1849 cents per kilowatt hour (kWh)
• Secondary: 1.1448 cents per kWh
• Primary: 1.1070 cents per kWh
• Subtransmission: 1.1026 cents per kWh
• Transmission: 0.5205 cents per kWh

These decreases will be offset by increases in other Illuminating Company riders for certain rate schedules:

• For all customers, a new Deferred Fuel Cost Recovery Rider will take effect on January 1, 2011 at a rate of 0.0492 cents per kWh.  This would be $0.49 per 1,000 kWh.
• For residential customers, the Residential Deferred Distribution Cost Recovery Rider will increase by 0.7086 cents for each of the first 500 kWh, through May 31, 2011.  This rider is zero during the summer months of June, July and August.  The maximum increase is $3.54 per month for the first five months of 2011.
• For Secondary Service customers, the Non-Residential Deferred Distribution Cost Recovery Rider will increase by 1.1448 cents per kWh, through May 31, 2011.   This rider is zero during the summer months of June, July and August.  This would be $11.45 per 1,000 kWh for the first five months of 2011, and would exactly offset the reduction in the transition charge.

These are the changes that are known at this time; there could be others.  Note also that these rates are effective through May 31, 2011.  FirstEnergy has filed a new rate plan to be effective on June 1, 2011, but the Public Utilities Commission of Ohio has not yet ruled on the filing.