Winter in Canada and the northern US can be brutal or benign. While the east can bask in above-normal temperatures, the west can be in a deep freeze. And vice versa. Furthermore, winter weather conditions can change – seemingly in the blink of an eye.
The unpredictability of winter creates risks in meeting heating requirements. How much natural gas, propane or heating oil should an organization procure when temperatures can be so variable?
If weather becomes severe, with prolonged cold periods, it’s quite likely that market prices for heating fuels will rise in response to increased demand. Energy users often manage this risk by purchasing fixed contracts to meet some, or all, of their fuel requirements.
Contracts can fix volumes or hedge prices to meet their predicted winter fuel load. If cold weather or utility requirements force customers to purchase more fuel than they hedged, they could still end up paying more than expected. In these cases, there are options to help decrease the cost impact.
The key is for energy consumers to be proactive. They need to keep a close eye on market prices. They need to know their current consumption and balancing requirements. They need to take weather forecasts into account – recognizing they are forecasts not guarantees!
Preparation pays dividends. A customer who is aware of over-using gas in December and January can consider purchasing additional natural gas early, before other market participants drive prices higher. While it may not be possible to purchase all the gas needed to meet requirements before the end of January, a reasonable portion of it can be procured early – if the consumer is prepared.
As one example, Union Gas franchise customers in Ontario[1] require their customers to “balance” their load, twice yearly, in order that Union Gas can meet the volume requirements for all users. In February, customers who have been consuming more gas than they had forecast, are required to purchase enough gas to bring them back in line with their contract commitments. If natural gas prices are elevated at that point, the customer will pay the now higher market price. A better prepared customer might avoid some of those higher costs. 360 Energy helps companies develop sophisticated energy plans to get a grip on winter. Have a plan and take the bite out of winter heating woes. Call us. We can help.
[1] Union Gas was purchased by Enbridge a few years ago, but still operates with a separate system and set of rules.
