Your Attention………Please
April 24, 2012
Residential electric customers
In…
New Jersey and Pennsylvania….
You finally have an opportunity
To lock your electric supply cost
At a fixed price…….
For a
12 month period
This means saving of
Around 15%
Off your current
Local provider supply cost
If you look at your PSEG residential electric bill
You will see your…..
Price to compare
For electric
Is around
$.116 cents per kwh
Atlantic City Electric customers
Your bill shows a
Price to compare of around
$.122 cents per kwh
We now have a program that will permit
Residential customers in New Jersey
To lock their electric supply cost for
$.0999 cents per kwh
For a 12 month period
For a typical household
This provides savings
Of over $300 a year
No additional cost
No transfer fees
No interruption of service
The supply charges will be billed on
Your current local provider bill
Best yet…..
Nothing changes…….
Should you have an electrical problem…..
You still will call your local provider
To service the account
This opportunity is also available for….
All Residential Pennsylvania
Electric customers
(Contact us to find out your rate…….
Your savings are comparable)
As most of you know…
HBS has been in the deregulated energy business
Since January 2000
We have been providing
This service…
For only the commercial market
I get several calls
Every week
From my clients
Asking……
Can you help me with my home electric bill……
Many have faxed or emailed me…….
All the special offers they have been receiving
Problem was……
All I found was……
Smoke and Mirrors
They had the sizzle….
No contract…..
Month to month……
Low variable rate……..
They also had……..
Minimal to no $avings
Many have complained to me
They actually paid more
Than the provider price to compare
For the first time
We have found
A Residential opportunity
That will provide….
True savings….
For your…..
Residential Electric Account
Should you like to know more…..
About this saving opportunity
For your home
Email……..
Or call our office 856-857-1230
$300 savings
For me…..
It was the equivalent
Of getting 1 month
Free electric a year
Visit our website: www.hutchinsonbusinesssolutions.com to learn more about opportunities available to provide savings.
Saving in the Deregulated Utility Market
March 21, 2011
Note: With the current deregulated market opportunities now being presented to many business that qualify, the market has been inundated with new sales personnel. I found this article provides on objective overview of questions you should ask and details you should know before making a decision.
There are many companies offering variable electric rates. I would not recommend this solution at this time.
With natural gas prices being the lowest they have been in the last 3 or 4 years, there are great opportunities to lock into a fixed price electric contract for a 1 or 2 year period.
By Carl Shaw
With the deregulation of energy in many parts of the US, competition is now allowed between energy companies to provide electricity at discounted rates directly to their customers. These Energy Service Provider Companies (ESCOs) are licensed by individual states and are required to adhere to the applicable regulatory guidelines set by the Public Service Commissions (PSC) or Public Utility Commission (PUC). Customers (end-users) also have the opportunity to work with electricity brokers or consultants who can compare different offers and provide additional services to help manage your monthly energy spending and costs.
If you are a business spending a minimum of $3000 a month on your electric or natural gas bill, you may qualify to choose your electric or natural gas supplier in deregulated markets, which could create savings opportunities. Companies that can control or manage their electric consumption to use more electricity in the off-peak hours will find the greatest opportunity for savings. In deregulated markets, you now have a choice and can choose lower energy rates without any risk or local service change.
Your local energy service providers buy natural gas and electricity on the open market at wholesale prices based on the current market conditions and then bill their customers at increased rates to include margins and/or service fees.
Independent Deregulated brokers can put your company in a competitive position by leveraging extensive buying power to help you develop energy supply procurement programs. They can conduct an unbiased rate and tariff analyses that may result in substantial savings to you.
Due to the current economic conditions and the complications deregulation has caused there are many new energy advisory companies popping up, so be sure to know all the facts before making any decision.
When choosing a qualified utility tariff analysis & rate optimization firm to represent you, you should be aware of a few things:
First, be sure that the price you are quoted from your local provider includes all charges. Should you be talking to a consultant or broker, make sure the price is “fully loaded” meaning, does it include the 7% loss allowance (to deliver 100,000 kWh of electric, the providers must actually send 107,000 kWh, for there is a 7% loss in transmission)? Also does it include the local sales tax?
In PA, you must also ask if the price includes GRT (gross receipt tax) and RMR (reliabilty must run). RMR is a pass thru charge from the provider that allows them to meet peak demand periods when they must use additional resources to meet this demand. This is normally found during the summer months.
All these important components should be included in the quote from your deregulated provider to make an accurate comparison. These components are included in your price to compare from your local provider. Often, companies will provide a low end quote without including sales tax and a load allowance. Be sure you are comparing apples to apples. Often when these figures are included, their real quote is much higher.
Does the company providing your quote have an Energy Information Management System in place, to make sure that you are getting the best available rate?
Are they shopping your account to more than 1 provider. Each provider has a sweet spot (a market they are most competitive in). An independent broker who knows the market will be able to identify these providers and work to get the best price.
Information is power. Knowing what questions to ask will save you time and money.
There are opportunities to save from 10% to 25% in the deregulated electric market depending on your usage patterns.
When making a final decision, know that you are dealing with a commodity and timing is everything. Market fluctuations may happen on a daily basis.
November 30th, 2010 Adam Ebner
As reported in Nationwide Deregulated Energy News
In a very competitive marketplace, energy deregulation gives businesses better control of their business electricity costs. Aside from that, there are myriad other benefits and option that their companies would get from a deregulated and competitive energy market – options that were not possible in the past due to high energy expenses and limitations set by the monopolized energy industry.
The deregulation of the many utilities markets gave birth to the emergence of several retail electric providers all competing for subscriptions from both residential and commercial energy users in the state and in energy deregulated cities such as Philadelphia, Pittsburgh, New York City, Chicago, Washington DC, Houston, Dallas and many others. Now given the power to choose, selecting from over 50 retail electricity providers can be a daunting task indeed; with businesses finding themselves at the losing end should they fail to choose the best provider for their needs. This is why businesses should work in partnership with certified electricity brokers to negotiate in their behalf the best electrical rates, payment schemes and other amenities from the various Texas electric companies.
Electricity Brokers:
Your Helping Hand Unlike electricity management at home, businesses have more complex processes and operational needs for electricity that if not managed would find them dealing with extremely high energy costs that would eventually affect their bottom line. Electricity brokers can come into the picture and help businesses find ways on how they can efficiently use Texas electricity and help them minimize their energy costs. These brokers deal and negotiate electrical rates with retail electric providers for the benefit of the business.
No matter what business or industry your company may be in, electricity brokers can provide professional services using up-to-date information of the energy market in a bid to obtain the best commercial electricity deals for the company.
Why Should You Use Electricity Brokers to Shop Electricity?
Businesses may not have the resources available to have an independent study or analysis of the various retail electric providers offering commercial electricity before they switch and commit to the services of one. Aside from this, companies may have to deal with all the other elements in the very complex energy market such as new regulations, changes in fees, penalties, reduction of carbon emissions, etc. Hiring an electricity broker can spare the company from all these, so that all their staff and resources can focus on only one thing – doing business.
Electricity brokers can help companies with their procurement decision, eliminate possible over payments, recover over payments, management of energy consumption, and continuous energy usage analysis. Electricity brokers can uncover and identify areas in the business processes where they can implement significant improvements. These brokers are not in any way tied up with any major retail electric provider, allowing them to give unbiased advice to businesses and help them get the best energy solutions for their companies.
Our Perspective:
Hutchinson Business Solutions (HBS) is an independent energy management company. We represent all the major providers selling deregulated energy in deregulated states. We will do a full analysis of your account and shop your account with our providers to find the best value and savings for your company.
HBS clients are finding savings from 10% to 20% in the deregulated utility market.
To learn more email george@hbsadvantage.com
Natural gas costs unlikely to remain low through 2011
January 24, 2011
David Parkinson – Globe and Mail Update Dec. 31, 2010 5:41PM EST
When Arthur Berman argues that natural gas is destined to have better prices in 2011 than it had in a mediocre 2010, he isn’t talking about technical price charts, or historical correlations, or relative valuations, or even supply-and-demand balances.
No, his view is more down to earth. He’s talking about geology.
“I’m a working petroleum geologist, I’m not a financial analyst,” said Mr. Berman, a prominent Houston-based energy consultant whose controversial views on the North American shale-gas phenomenon have raised eyebrows in the industry. “We probably have a lot less natural gas resource than is commonly believed. “So, what I see is that natural gas prices will not remain depressed. I’m not a price forecaster, but I have every reason to believe that a long position in natural gas [investing] is a smart position.”
The natural gas pricing story has been all about shale gas in 2010, and its fate in 2011 is closely tied to this big wild card, too. Thanks to advances in drilling technology for extracting gas from seams in shale rock, there has been a rapid expansion of drilling in shale plays that were once considered impossible to economically exploit. The resulting boom in production has unleashed substantial new supplies on the North American marketplace, outstripping demand and bloating inventories. Volumes of gas in U.S. storage facilities swelled to record levels last month – 40 per cent higher than they were 10 years ago, almost 20 per cent higher than five years ago – even as gas consumption has rebounded to near pre-recession levels.
That kept natural gas prices low and in decline for most of 2010. Even with the high-demand winter season approaching, prices struggled to stay above $4 (U.S.) per million British thermal units on the New York Mercantile Exchange well into December – their weakest December prices in nearly a decade.
The majority of industry analysts believe the shale-gas boom will continue to keep supplies well above consumption levels in 2011, weighing down natural gas prices. “The fundamentals of oversupply are not likely to change in 2011,” said Peter Tertzakian, chief energy economist at ARC Financial Corp. in Calgary. “Since we expect U.S. natural gas demand growth to come to almost a standstill in 2011 and supply growth to stay in positive territory, the inventory glut remains a concern,” said analyst Dominic Schnider of UBS AG in a recent research note.
But a vocal minority – led by the likes of Mr. Berman and renowned long-time oil and gas forecaster Henry Groppe – believe shale gas may be a bubble that could begin to burst in 2011. They are concerned with both the extremely rapid rates at which production from new shale-gas wells drops off, and the high costs of development and production that suggest to them that producers won’t be willing to keep up the high pace of drilling in shale plays at these unprofitable prices much longer. “[Shale] is a great new resource. I don’t dispute for a moment the size of the resource or its importance,” said Mr. Berman, who, like Mr. Groppe, serves as a consultant to Toronto-based fund management company Middlefield Capital Corp. “What I question is, ultimately, what it will cost to produce the resource.” Mr. Berman’s analysis tells him that North American shale-gas reserves have been exaggerated; that “more than half of the commercial reserves are produced in the first year” of each well; and that the full costs for producing shale gas work out to about $7 per million BTU – far above the current selling price.
He believes companies have been encouraged to aggressively drill U.S. shale plays due to regulations requiring producers to either initiate drilling on their properties or lose them – they want to secure the land. But that won’t continue through 2011, he said. “As I listen to the comments of the executives of the companies that are most active in the shale plays in the U.S., they’re all saying that they’re going to continue to hold the land through the first half of 2011, and then you’re going to see a big decrease in [drilling] rig count,” Mr. Berman said. “They’re smart people; they’re not going to continue to do this beyond the time that they have to.” Instead, he said, companies will redirect their drilling rigs to oil properties, where the cost-to-price equation is much more profitable. That will slow natural gas volumes and change market perception of shale’s potential, he said – and that will push up prices. “It would not surprise me to see the end of 2011 start to see a notable recovery of price,” he said.
Mr. Tertzakian acknowledges that natural gas prices must eventually revert to at least high enough to cover “the marginal costs of producing natural gas in North America,” which he pegs at the $5 to $6 range. However, he doesn’t see that happening in 2011 – and he doesn’t envision a major drop-off in shale drilling or a serious hit to supplies over the next year. “There’s no shortage of gas in the ground. We can debate the technical nuances, but at the end of the day, it takes a certain amount of money to exploit these things – the only restriction is the availability of capital.” He expects some slowdown in natural-gas rig count in the second half of next year could moderate supplies, but that won’t do much to make up for what should continue to be a weak market in the first half – making for another year of 2010-like prices.
“Prices in 2011 will be similar to 2010,” agreed Bill Gwozd, vice-president of gas services at Calgary energy consulting and analysis firm Ziff Energy Group. “That’s not a healthy price for producers – but it’s quite nice for consumers.”
PSEG approves you switching service providers under the new Gas & Electric Dergulation Law…..Really!
January 17, 2011
As presented by Public Power (An overview of the deregulated electric in the residential market)
Many of those that are considering switching over are a little confused about what is actually happening.
You are not switching your gas & electric company, you are only switching service providers.
What this means,for example:
If PSEG is your current Gas & Electric Company. They will remain your Utility company. They will still service your home if you have a problem or power outage etc. You will still receive and pay your Bill thru PSEG. What you are doing is simply switching where your Gas and Electric is coming from. In this case you will be asking PSEG to simply obtain your Gas & Electric from Public Power,LLC instead of their current provider. Currently Public Power per Kilowatt rate is cheaper than PSEG ‘s provider. You can check on your rate by looking at your BILL and looking up the kWh rate.
Then go to https://ppandu.com/historical_rates.php to check Public Powers’s historical rates for other areas they currently service. Though rates vary from month to month, you will find they have been historically lower then PSEG, Con Ed and many other NY & NJ utility providers.
Actual electric rates for 2009 in January were 11.2 for Public Power and Utility (PP&U), … Feb 2010, 9.999*, 11.051*, 11.568*. Jan 2010, 9.999*, 11.051*, 11.568* …
PSEG Sept 2010 Average Residential rate is 12.00 per kWh
Currently if you are using under 600 kWh per month you are paying about 11.46 per kWh. If you never exceed that all year then your rate will stay at about 11.46.
But as soon as you go over 600 Kwh June thru Sept,that part of your bill is jacked up to about 12.34 per kwh. So on average if you are using from 601 kWh and more during the year, the blended average rate is about 12.00 per kwh. Understand above ONLY reflects the cost of electricity, not the PSEG delivery charges etc. The rates we are concerned with are just the BGS Energy charges, which on your bill is the “Rate to Compare” when you are considering a 3rd party supplier for your electric such as Public Power.
SEE BELOW THE PSEG RATE(TARRIF) Chart (approved June 2010) Note the highlighted rates
PUBLIC SERVICE ELECTRIC AND GAS
COMPANY Twenty-Eighth
Revised Sheet No. 67 Superseding
B.P.U.N.J. No. 14 ELECTRIC Twenty-Seventh Revised Sheet No. 67
BASIC GENERATION SERVICE – FIXED PRICING (BGS-FP)
ELECTRIC SUPPLY CHARGES
APPLICABLE TO:
Default electric supply service for Rate Schedules RS, RSP, RHS, RLM, WH, WHS, HS, BPL, BPLPOF, PSAL, GLP and LPL-Secondary (less than 1,000 kilowatts).
BGS ENERGY CHARGES:
Applicable to Rate Schedules RS, RHS, RLM, WH, WHS, HS, BPL, BPL-POF and PSAL Charges per kilowatthour:
| Rate
Schedule |
For usage in each of the
months of October through May |
For usage in each of the
months of June through September |
||
|
Charges |
Charges |
|||
| Charges | Including SUT | Charges | Including SUT | |
| RS –first 600 kWh | 11.4627 ¢ | 12.2651 ¢ | 11.4356 ¢ | 12.2361 ¢ |
| RS – in excess of 600 kWh | 11.4627 ¢ | 12.2651 ¢ | 12.3477 ¢ | 13.2120 ¢ |
| RHS – first 600 kWh | 9.8139 ¢ | 10.5009 ¢ | 10.9809 ¢ | 11.7496 ¢ |
| RHS – in excess of 600 kWh | 9.8139 ¢ | 10.5009 ¢ | 12.2005 ¢ | 13.0545 ¢ |
| RLM On-Peak | 16.1526 ¢ | 17.2833 ¢ | 15.6936 ¢ | 16.7922 ¢ |
| RLM Off-Peak | 7.4633 ¢ | 7.9857 ¢ | 7.8736 ¢ | 8.4248 ¢ |
| WH | 9.5068 ¢ | 10.1723 ¢ | 10.6903 ¢ | 11.4386 ¢ |
| WHS | 7.7482 | 8.2906 ¢ | 8.9246 ¢ | 9.5493 |
| HS | 10.3708 ¢ | 11.0968 ¢ | 13.9608 ¢ | 14.9381 |
| BPL | 7.3379 | 7.8516 ¢ | 7.6450 ¢ | 8.1802 ¢ |
| BPL-POF | 7.3379 ¢ | 7.8516 ¢ | 7.6450 ¢ | 8.1802 ¢ |
| PSAL | 7.3379 ¢ | 7.8516 ¢ | 7.6450 ¢ | 8.1802 ¢ |
The above Basic Generation Service Energy Charges reflect costs for Energy, Generation Capacity, Transmission, and Ancillary Services (including PJM Interconnection, L.L.C. (PJM) Administrative Charges). The portion of these charges related to Network Integration Transmission Service, including the PJM Seams Elimination Cost Assignment Charges, the PJM Reliability Must Run Charge and PJM Transmission Enhancement Charges may be changed from time to time on the effective date of such change to the PJM rate for these charges as approved by the Federal Energy Regulatory Commission (FERC).
Kilowatt threshold noted above is based upon the customer’s Peak Load Share of the overall summer peak load assigned to Public Service by the Pennsylvania-New Jersey-Maryland Office of the Interconnection (PJM). See Section 9.1, Measurement of Electric Service, of the Standard Terms and Conditions of this Tariff.
Note: Hutchinson Business Solutions has been providing independent deregulated energy management solutions for corporate clients for over 10 years. Although we do not currently provide these services to the residential market, we felt that it is important to make this information available to the general public, since many residential customers are now looking at this opportunity.
Date of Issue: May 20, 2010-Effective: June 1, 2010
Issued by FRANCES I. SUNDHEIM, Vice President and Corporate Rate Counsel
80 Park Plaza, Newark, New Jersey 07102
Filed pursuant to Order of Board of Public Utilities dated March 1, 2010
in Docket No. E009050351
New Jersey consumers perplexed by elecric-power options
January 17, 2011
By Andrew Maykuth
Inquirer Staff Writer
The pitches are often long on enthusiasm, but short on facts.
“When you ask for details, they just say, ‘You’re going to save money!’ ” Rosenbloom said.
The Burlington County resident looks longingly across the Delaware River, where Peco Energy Co. customers are rapidly moving into a market-rate environment.
Pennsylvania residential customers have access to a wealth of comparative information on rates assembled by the Public Utility Commission or the state Office of the Consumer Advocate.
But in New Jersey, where suppliers are offering residential discounts of 12 percent and more, consumers are largely on their own when it comes to assessing the data.
“We don’t know what to do,” Rosenbloom said.
J. Gregory Reinert, the communications director of the New Jersey Board of Public Utilities, said there were too many offerings for Garden State regulators to manage the data on behalf of customers.
“We do not provide comparison data of third-party suppliers or utilities,” he said.
“Customers need to do comparison shopping by either calling or visiting the websites of each company to review the tariffs or promotions, and make their own comparisons and decisions,” Reinert said.
New Jersey’s approach stands in contrast to the model states lauded in a recent industry study of electricity deregulation. Advocates of market rates say competition helps suppress electrical costs by encouraging more efficiency and conservation.
Nat Treadway, the managing director of a Houston firm that conducts an annual assessment of restructured markets, in December singled out Pennsylvania’s system for praise.
In most deregulated states, including New Jersey and Pennsylvania, customers are free to choose the company that generates their electricity, which makes up the biggest part of their bill. Traditional utilities, such as PSE&G and Peco, are solely distributors of power and do not make money off power generation – even on the electricity they buy on behalf of customers who do not switch.
Treadway, managing partner of the Distributed Energy Financial Group, said the best markets for encouraging electrical choice were in Texas and New York.
By contrast, Treadway called New Jersey’s restructured residential market “marginal.”
Ronald M. Cerniglia, director of governmental and regulator affairs for Direct Energy Services L.L.C., a large electricity marketer operating in several states, called New Jersey’s marketplace “suboptimal.”
He said the best competitive markets set up rules that encourage alternative suppliers to do business while still providing traditional consumer protections.
Regulators in thriving markets also make efforts to educate customers. One way is to maintain websites with neutral cost comparisons.
The Pennsylvania PUC’s papowerswitch.com lists most current suppliers, and some of their offerings. The Texas and New York utility commissions operate sophisticated websites that allow consumers to search for competitive offers by zip code: powertochoose.org and newyorkpowertochoose.com.
The New Jersey BPU rolled out a website for power-shopping after it opened electricity markets to competition in 1999, part of a $13.5 million promotional effort.
But New Jersey’s rates were still rigidly structured, and residential suppliers stayed away. The BPU’s website was abandoned in 2003 and the domain name was taken over by a Spanish pornography site, according to the Newark Star-Ledger.
Only in the last year have alternative suppliers planted their flags in New Jersey’s residential markets. As of November, 98,700 customers out of New Jersey’s 3.3 million households had switched to alternative suppliers, up from a mere 213 households in 2009.
By comparison, Peco Energy Co. says 96,000 of its residential customers have switched suppliers, most in the two weeks since rate caps were lifted Jan. 1.
The BPU provides the names of suppliers on its website, but the list appears to be out of date. South Jersey Energy Co. is listed as a residential electrical supplier even though it has been “out of residential for a number of years,” according to Joanne Brigandi, a company spokeswoman.
And in some cases, it is difficult for New Jersey customers to locate even the most basic information from which they can make an informed choice.
PSE&G’s basic-generation service – the price to compare – is listed as 11.5 cents per kilowatt-hour on some alternative suppliers’ websites.
PSE&G spokeswoman Karen A. Johnson confirmed Friday that the utility’s price to compare is 11.5 cents per kilowatt-hour.
Several suppliers are offering discounts below either price. They are listed above.
Our Perspective:
Hutchinson Business Solutions has been providing deregulated energy management solutions to our business clients for over 10years. Although we currently do not serve the residential markets in deregulated states, I found it prudent to offer some insight to the many residential clients now seeking savings in the deregulated electric market.
Since NewJersey just introduced the opportunity to their residents in the spring of 2010 and Pennsylvania in January 2011, many people have jumped on the band wagon selling electric.
We get several calls daily from 0ur clients asking questions about saving for their home electric. The first thing that I caution them is to make sure the price that is being presnted is fully loaded and contains all the factors that are included to make a cost to compare analysis. Does it include a 7% loss allowance (to deliver 100 kw of electric you must send 107 kw for there is a 7% is line loss in the delivery of the electricity) and 7% sales tax. These factors are included in the PSEG and AC Electric price to compare.
The second thing we caution clients to look for is a fixed price. Natural gas prices are the lowest they have been in the last 3 to 4 years. Although they have spiked recently due to the winter cold, prices are still very attractive. Thirty % (30%) of the electric generated in the US is made with natural gas. Because of this, natural gas prices serve as a stong indicator used for electric market prices. By choosing a fixed price, you can lock your position for a 1 or 2 year period.
Variable pricing does not provide this opportunity and is therefore a more riskier decision at this time.
Proceed with caution and make sure to get all the facts before choosing a deregulated residential electric provider.
Read more: http://www.philly.com/inquirer/business/20110116_New_Jersey_consumers_perplexed_by_elecric-power_options.html?viewAll=y#ixzz1BFl4JZXL
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What is shale gas and why is it important?
December 17, 2010
As reported by 
Shale gas refers to natural gas that is trapped within shale formations. Shales are fine-grained sedimentary rocks that can be rich sources of petroleum and natural gas. Over the past decade, the combination of horizontal drilling and hydraulic fracturing has allowed access to large volumes of shale gas that were previously uneconomical to produce. The production of natural gas from shale formations has rejuvenated the natural gas industry in the United States.
Did You Know?
Sedimentary rocks are rocks formed by the accumulation of sediments at the Earth’s surface and within bodies of water. Common sedimentary rocks include sandstone, limestone, and shale.
Did You Know?
Shale gas in 2009 made up 14% of total U.S. natural gas supply. Production of shale gas is expected to continue to increase, and constitute 45% of U.S. total natural gas supply in 2035, as projected in the EIA Annual Energy Outlook 2011.
Does the U.S. Have Abundant Shale Gas Resources?
Of the natural gas consumed in the United States in 2009, 87% was produced domestically; thus, the supply of natural gas is not as dependent on foreign producers as is the supply of crude oil, and the delivery system is less subject to interruption. The availability of large quantities of shale gas will further allow the United States to consume a predominantly domestic supply of gas.
According to the EIA Annual Energy Outlook 2011, the United States possesses 2,552 trillion cubic feet (Tcf) of potential natural gas resources. Natural gas from shale resources, considered uneconomical just a few years ago, accounts for 827 Tcf of this resource estimate, more than double the estimate published last year. At the 2009 rate of U.S. consumption (about 22.8 Tcf per year), 2,552 Tcf of natural gas is enough to supply approximately 110 years of use. Shale gas resource and production estimates increased significantly between the 2010 and 2011 Outlook reports and are likely to increase further in the future.
Where is Shale Gas Found?
Shale gas is found in shale “plays,” which are shale formations containing significant accumulations of natural gas and which share similar geologic and geographic properties. A decade of production has come from the Barnett Shale play in Texas. Experience and information gained from developing the Barnett Shale have improved the efficiency of shale gas development around the country. Another important play is the Marcellus Shale in the eastern United States. Surveyors and geologists identify suitable well locations in areas with potential for economical gas production by using both surface-level observation techniques and computer-generated maps of the subsurface.
Source: U.S. Shale Plays Map, http://www.eia.doe.gov/oil_gas/rpd/shale_gas.pdf
How is Shale Gas Produced?
Two major drilling techniques are used to produce shale gas. Horizontal drilling is used to provide greater access to the gas trapped deep in the producing formation. First, a vertical well is drilled to the targeted rock formation. At the desired depth, the drill bit is turned to bore a well that stretches through the reservoir horizontally, exposing the well to more of the producing shale.
Hydraulic fracturing (commonly called “fracking” or “hydrofracking”) is a technique in which water, chemicals, and sand are pumped into the well to unlock the hydrocarbons trapped in shale formations by opening cracks (fractures) in the rock and allowing natural gas to flow from the shale into the well. When used in conjunction with horizontal drilling, hydraulic fracturing enables gas producers to extract shale gas at reasonable cost. Without these techniques, natural gas does not flow to the well rapidly, and commercial quantities cannot be produced from shale.
Schematic Geology of Natural Gas Resources
Source: modified from U.S. Geological Survey Fact Sheet 0113-01.
How is Shale Gas Production Different from Conventional Gas Production?
Conventional gas reservoirs are created when natural gas migrates toward the Earth’s surface from an organic-rich source formation into highly permeable reservoir rock, where it is trapped by an overlying layer of impermeable rock. In contrast, shale gas resources form within the organic-rich shale source rock. The low permeability of the shale greatly inhibits the gas from migrating to more permeable reservoir rocks. Without horizontal drilling and hydraulic fracturing, shale gas production would not be economically feasible because the natural gas would not flow from the formation at high enough rates to justify the cost of drilling.
Diagram of a Typical Hydraulic Fracturing Operation
Source: ProPublica, http://www.propublica.org/special/hydraulic-fracturing-national
What Are the Environmental Issues Associated with Shale Gas?
Natural gas is cleaner-burning than coal or oil. The combustion of natural gas emits significantly lower levels of key pollutants, including carbon dioxide (CO2), nitrogen oxides, and sulfur dioxide, than does the combustion of coal or oil. When used in efficient combined-cycle power plants, natural gas combustion can emit less than half as much CO2 as coal combustion, per unit of energy released.
However, there are some potential environmental issues that are also associated with the production of shale gas. Shale gas drilling has significant water supply issues. The drilling and fracturing of wells requires large amounts of water. In some areas of the country, significant use of water for shale gas production may affect the availability of water for other uses, and can affect aquatic habitats.
Drilling and fracturing also produce large amounts of wastewater, which may contain dissolved chemicals and other contaminants that require treatment before disposal or reuse. Because of the quantities of water used, and the complexities inherent in treating some of the chemicals used, wastewater treatment and disposal is an important and challenging issue. If mismanaged, the hydraulic fracturing fluid can be released by spills, leaks, or various other exposure pathways. The use of potentially hazardous chemicals in the fracturing fluid means that any release of this fluid can result in the contamination of surrounding areas, including sources of drinking water, and can negatively impact natural habitats.
Who Hit the Switch?
December 9, 2010
We have been lucky over the pas t few years. We have been blessed with warmer than usual winter temperatures. I know; last year we had some major snowstorms but overall the winter temperatures have been warmer.
Over the last year we have seen the natural gas market prices react to these warmer temperatures. Storage numbers have been at a 5-year high and prices have continued to drop to their lowest sustaining level in the last 3 to 4 years.
Speaking with many energy analysts, they feel we may have hit the bottom and prices will slowly start inching up.
Inching up may be an understatement? Just in the last week, prices jumped over 10%. Hit with the sudden cold front the market took off.
The cost of buying natural gas on the open market is made up of 2 factors. Nymex (gas out of the ground to the banks of Louisiana) and Basis (the transportation cost for getting natural gas delivered to your local provider). These 2 factors combined give us the Index. This is the total wholesale cost to buy natural gas on the open market.
The last couple of weeks have seen the market in a holding pattern. Nymex prices were under $4.00 a decatherm ($.40 cents a therm) and it was a wait and see scenario. Should we have seen continued mild temperatures the market would have remained stable.
With the sudden switch to cold temperatures and forecast for a continued cold snap; the market did not inch up but leapt. Nymex prices open today, as of this writing, at $4.61 a decatherm. Measure this against the low opening on 10/25/10 of $3.29 a decatherm.
Prices are still low compared to where they were 2 to 3 years ago. In 2008, natural gas prices hit a high of $14 to $16 a decatherm ($1.40 to $1.60 a therm). Just last year (2009) we were looking at the average price to compare of around $10.00 a decathem ($1.00 a therm). We are now seeing fixed price positions in the low to mid $6.00 a decatherm range.
Each account is unique and priced individually, for pricing is based on demand factors. Many clients are seasonal clients and their biggest usage comes from heating their locations during the winter. Their natural gas prices would be higher than a client having a more even demand factor, for they use natural gas throughout the year (a restaurant would be a good example).
Some clients have benefited by floating the market, taking advantage of the falling prices over the last couple of years. Now may be the time to begin a discussion and review your options. There is more upside risk (chance of prices raising higher) than there is downside risk (market prices have been at a 4 year low).
You can lock the price going forward for a 1 or 2-year period, which will provide an overall savings from the average prices you have been paying over the last year or at the minimum, lock the winter month which will provide price certainty.
Should you feel this is only a temporary rise in market prices, you may choose to float the market and look for a continued flatness in pricing.
One other option to consider, should the float scenario be of interest, would be to lock the basis (transportation cost) and continue to float the nymex. Several of our clients have found success with this option in the past. This position is normally taken when they see the Nymex as being too high and feel the market will be dropping over time. In the past, if we saw basis price fall under $2.00 this was considered to be a good deal. The current basis prices are well under $2.00.
Should you like to know more about your deregulated gas options email george@hbsadvantage.com or call 856-857-1230
Visit us on the web www.hutchinsonbusinesssolutions.com
