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Q1 2018

The RealPage Energy Outlook

A quarterly publication providing detailed information on the forces that affect your energy rates.

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Get the details on pricing trends, weather, storage levels, tariffs and more.


The Energy Outlook is designed to inform you about the current state of the natural gas and electric energy markets. While prices are most important, we offer insights into the drivers of the energy markets and shed some light on how these drivers impact market prices. The primary energy market drivers fall into 2 areas: Fundamentals and Politics.

  • Fundamentals are the factors influencing energy supply and demand of electricity and natural gas. Supply factors include power generation, natural gas production (drilling rigs, fracking, and horizontal boring), underground gas storage, and pipeline capacity. Demand factors include consumer usage and weather (driving how much energy is required for heating and air conditioning seasons).
  • Politics include changes to the legal and regulatory environment that can cause major moves in energy prices. Political impacts can be new emission standards such as mandated movement to cleaner generation facilities with higher operating costs, new energy taxes or fees, and restrictions on new pipeline or transmission line placement. Political factors can be domestic or international.


Prices Remain Low

Natural Gas Prices continue to hover at minimal levels and should remain so based on expected mild temperatures for Q1. Although natural gas production is at the highest level ever, gas storage levels are a bit low and the recent Midwest and Northeast cold snap has put a dent in storage capacities. See below for more details on prevailing energy trends.

Natural Gas Storage

Storage Levels Are Below Previous Years – A Bit Concerning

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The Energy Information Administration (EIA) has released its year-end “Natural Gas Storage Report.” This report provides the nation’s current level of stored gas and is a primary driver in natural gas prices. The current storage level of 3,126 Bcf is 5.8% under last year’s same-day levels and 5.8% below the 5-year average level. The current storage levels being below previous years’ levels do raise some concerns. If colder than expected temperatures occur, storage levels will be exhausted and will have a negative impact on energy prices throughout this winter and into the summer.

The current storage level of 3,126 Bcf is under last year’s same-day levels as well as the 5-year average level.

Natural Gas Storage Levels (Bcf)
Current Storage Level 3,126
Storage - One Year Ago 3,318
5-Year Average Level 3,318

Weather Forecast

Upper Midwest and Pacific Northeast Predicted to Have Below Normal Temps

3-Month Outlook (01/2018 to 03/2018)

The weather forecast for the start of 2018 bisects the country. The entire southern half of the country along with the Atlantic coast are predicted to see warmer than average temperatures. Arizona, New Mexico and western Texas are expected to experience well above normal temperatures. Only the Upper Midwest and Pacific Northwest are forecast to have below normal temperatures. With weather’s weighty impact on energy prices, the above average temps during the first quarter of the year typically portend stable natural gas prices. The warmer winter temperatures lessen the need for natural gas heating, thus pushing natural gas prices down. Additionally, the warmer temps may also help lower electric prices this summer.

In December, the Climate Prediction Center reported that La Nina conditions are expected to continue through the remainder of winter. Forecasts call for above-average temperatures and below-average precipitation across the southern half of the continental US.

Drought conditions are expected to continue throughout the first quarter of 2018. Below-normal precipitation is expected from southern California through the southern Plains, which will exacerbate the already dry conditions. La Nina’s drought impact is expected to hit Florida and the southern Atlantic coast the hardest.

Beware of possible water restrictions and price penalties as local water districts struggle to maintain adequate water supplies.

Energy Prices

Natural Gas Is Leaning Low

The Energy Outlook mainly focuses on natural gas prices because gas prices lead electricity prices. As natural gas prices increase or decrease, electricity prices often follow suit, but usually hours, days or weeks later. Also, natural gas has a national price established on the NYMEX. Other regional prices and markets exist, but are compared with NYMEX prices. Electricity is different because the U.S. is divided into 6 regional markets, each setting its own price and having its unique market rules. All six regions tend to move in the same direction, but price volatility and generation vary considerably between regions.

The 2017 Spot Price chart shown above illustrates the volatility of the energy markets in 2017. We started the year at a high price of $3.71/MMBtu and dropped to $2.44 by the end of February, a 52% drop in prices. We were ending the year on a significant drop in prices only to see it buoy back after a cold streak hit in the last week of December. All factors indicate that the spike will be temporary and that prices will settle back down.

NYMEX gas prices for January closed at a low price of $2.738/MMBtu, which is the second lowest January price in the last 6 years. January 2017 opened at $3.93 and January 2016 opened at $8.69/MMBtu. Natural Gas prices are looking better now than in over a decade and everyone should be looking to take advantage of these low historic prices.

Looking long-term, the 12-month natural gas strip prices remain under $2.79 and Calendar 2019 strip prices are under $2.77. Electric prices have been rising in December, especially in the New England markets.

Regional Outlook

Expect Some Volatility Based on Temperatures

Energy markets are complex, with many regional factors. The regional markets may differ from the overall continental energy outlook. Below are regional energy insights of note and the factors driving those market conditions.


New England sees recent cold spell drive up prices. Natural gas spot prices hit an all-time high on January 5th, primarily as result of prolonged cold temperatures. Boston experienced spot prices at $78.88/MMBtu, several dollars above the Polar Vortex prices in 2013/14. Also impacting the market was the temporary shutdown of a nuclear generator forcing electricity to come from gas-fired generation, thereby diverting gas supply from heating homes and businesses. The limited natural gas pipeline capacity into New England is a primary driver of price volatility in the region.


Mid-Atlantic also sees cold spell spike power prices. The PJM regional market saw prices spike. Energy-only prices for electricity rose to over 14¢ /kWh in early January. The December monthly energy-only prices averaged 3.67¢ /kWh. Properties on variable electric rates will get a shock on their next invoice.


Midwest Prices Spike as temperatures plummet. The Midwest has experienced very low hourly prices for the past three years. Chicago’s last three December-to-January periods saw average energy-only electric prices of 2.68 ¢/kWh. After the recent cold spells, Midwest prices increased 25% to 3.34 ¢/kWh.


Texas energy markets experience price drops in both natural gas and power. December electric Spot prices are down 16% and natural gas prices down over 20% year-over-year. Milder temperatures lowered consumer demand as well as the need for gas fired generation. December’s average spot power prices were 2.12¢/kWh compared to December 2016’s 2.54¢/kWh. December’s average natural gas price was $2.757/MMBtu, 20% lower than the $3.474/MMBtu seen in December 2016.


California energy prices remain consistent. California natural gas prices have been flat despite the recent cold temperatures.

Bottom Line

Natural Gas Prices Are Low – Take Advantage of Them!

Natural gas prices are currently hovering at the lowest level since February ‘17. Temperatures are expected to be above normal for Q1. Gas Storage levels are a bit below normal and the recent Midwest and Northeast cold snap has put a dent in storage capacities. Natural gas production is at the highest level ever (crude oil production is at its highest since 1971).

As we kick off 2018, it’s a good time to re-think your long-range energy procurement strategy. Do you want to ride the market index prices or lock in to long-term low fixed prices? You may want to start asking yourself questions such as:

What happens to our budget?

What happens to our budget if natural gas prices spike this winter or electricity prices spike this summer?

What is our risk management?

What is our risk management policy to protect the business against energy price volatility?

What is our risk tolerance?

Do we want budget certainty with fixed prices or do we want current market prices and the associated risk of cost fluctuations?

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