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Is Now a Good Time to Lock In Energy Prices?
March 29, 2012
Today's tip comes to us from consultant Lindsay Audin, President of EnergyWiz. It’s about considering whether now might be a good time to contract to lock in long-term power prices. Even with the economy seemingly improving, there still may be a lot of volatility in energy prices due to an EPA regulation currently tied up in the courts.
The regulation, originally announced in July 2011, is called the Cross State Air Pollution Rule, or CSAPR. The rule was supposed to take effect in January, 1, 2012, but a coalition of industry groups successfully petitioned a federal appeals court to block the regulation, which it did just before the new year. And no further ruling is expected until at least the summer of 2012. This regulation would mandate coal-fired plants to shut down temporarily to be retrofitted with pollution controls. Others would be closed permanently. EPA estimates the regulation will prevent 34,000 premature deaths, 15,000 heart attacks and 400,000 cases of asthma - a savings of $280 billion a year in health benefits.
So while uncertainty over this regulation's fate remains, energy prices may fluctuate in the short-term, as suppliers try to predict how the court will rule. If the court sends the bill back for retooling, it’ll essentially die, says Audin.
So, even though gas and electricity prices are now at an all-time low, according to Audin, it may behoove facility managers to lock in prices, if for no other reason than to make energy budgeting easier. If you can lock in reasonable pricing for several years, it may be worth it in that you’re at least paying for budget stability.