I am pleased to forward 5’s second quarter overview of the energy market. In this quarter, energy markets continued the stable trend that characterized Q1. The relative calm is unusual and presents an excellent opportunity for customers to mitigate the risk of future periods of higher volatility and take advantage of historically low prices. The energy market’s price movement during the first 2 quarters of 2015 is reflected in the following chart:

I am pleased to forward 5’s first quarter overview of the energy market. For the most part, energy markets stabilized in Q1 2015, a significant change after the collapse in oil and natural gas prices experienced in Q4 2014. The following chart shows how electricity and natural gas prices have moved during Q4 2014 and Q1 2015. While electricity prices were flat in PJM and NYISO, they continued to decline (albeit at a slower rate) in ERCOT. We also saw a continued move down in the price of NYMEX natural gas. These trends continued in April.

Several recent legal challenges related to Demand Response (DR) may have a long-term impact on Demand Response programs, including how Demand Response participants get paid, and by whom.

The issues involve two separate cases about how energy and capacity are treated in DR programs. In one case, grid operators and power plants followed the Federal Energy Regulatory Commission’s (FERC) Order 745 for three years until it was challenged in the Pennsylvania, New Jersey, and Maryland Regional Transmission Organization (PJM RTO) market by a group of power producers. Order 745 sets the value of DR payments in energy markets to equal the hourly wholesale Locational Marginal Price (LMP) in effect at the time of demand reduction. This mechanism trims demand from the generators at times when hourly pricing is highest thereby cutting into their revenue during these high-priced periods.

As control of the U.S. Senate changes hands and Republicans begin chairing its committees, what changes in energy policy may we expect?

At about the same time the Senate majority switched parties, the last legal battle surrounding the Keystone XL Pipeline was settled in a Nebraska court. That set the stage for the first Congressional energy battle of the 114^th Congress. How that battle shakes out will also inform debates on fracking regulations and exporting of oil and natural gas. Such decisions may also impact the president’s position on using energy as a foreign policy tool. A recent example of this is the impact of lower energy prices combined with trade sanctions on both Russia and Iran’s economies. Do the recent advantages in foreign policy impact energy and environmental decisions put both parties on the same side of some of these issues? The Senate majority is too thin to overcome presidential vetoes, so probably not.

In March 2014, NYSERDA and Con Edison kicked off a very generous, but short-term, program to cut 125 MW off the utility’s summer peak demand. Unlike most existing energy-related incentive programs focused on reducing energy use i.e., kWh, the Demand Management Program (DMP) only rewards kW reductions. Also, it only applies if those reductions are both permanent and occur between 2:00 PM and 6:00 PM on weekdays between June 1 and September 30.

If there’s one constant in the energy business, it’s that things are always changing: Only 6 years ago, who would have thought that the average price of natural gas would drop by about 67%? Remember when some people thought the U.S. was running out of oil – until new extraction techniques reversed that Doomsday scenario? Or when everybody said, “you can’t economically store electricity,” and now battery prices are beginning to plunge?

I am pleased to forward 5’s fourth quarter overview of the energy market. Our last letter started with the statement “The speed and scope of changes in the energy market continues to astound us.” The trend continues. Q4 featured a spectacular sell off in crude oil. The price dropped from June highs of $112 per barrel for Brent and $105 per barrel for WTI to $62 per barrel for Brent and $59 per barrel for WTI in December. This sell off continued in January, with crude falling down to almost $45 per barrel. In this issue, we focus on increased volatility in natural gas and power driven, in part, by the drop in oil and natural gas prices in Q4, and two other significant topics, (i) new evidence of the energy market’s fundamental transformation, and (ii) the GOP’s sweeping victory in the November elections.

I am pleased to forward 5’s third quarter overview of the energy market. The speed and scope of changes to energy market continues to astound us. In this letter, we focus on the impact that changes in technology and consumer demand are having on another major industry player, traditional utilities, as well as the potential impact of such changes on our clients.A lead story by Rebecca Smith in the WSJ on July 28, 2014, “Electric Utilities Get No Jolt From Gadgets, Improving Economy – Electricity Sales Anemic for Seventh Year in a Row”, summarizes this turmoil very well. The story observes that for the first time, an improving economy and consumers’ purchases of more and more energy consuming devices, are not translating into increased consumption of electricity. This trend is reflected in current electricity and natural gas prices.

Last winter saw some of the widest spreads for power pricing ever to occur in the Northeast. Some customers saw monthly bills double or triple, relative to the same month in prior years. What happened, and could it happen again?

Several factors influence hourly and daily power pricing, including the wholesale price of fuels, outage of a power plant or transmission line, or a sudden jump in power demand. Last winter, we experienced a lot of the first, some of the second, and a chunk of the third. The largest impact was the huge jump in the local price of natural gas, which supplies, on average, over 60% of power in the NYC region. The wholesale price of gas at the Henry Hub in Louisiana increased from a norm of about $4 a dekatherm (dTH) to over $7 on several days. The local price for Transco Zone 6 for New York City pushed that up to over $30 a day most of the time and more than $120 on a few occasions.  When natural gas is traded, the difference between the Henry Hub price and a specific location for delivery is called basis.

Recent regulations by the US Environmental Protection Agency (EPA) are causing some coal-fired power plants to shut down, either permanently or for extended periods for retrofits. Dire predictions are being heard about how that could cause wholesale and eventually retail power pricing to rise by 30%. Could that affect local electric bills?