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October 2014


“Perfect Energy Storm” threatens Electricity Prices


In March of 2008, I wrote the first column about the “Perfect Energy Storm” and revisited the topic in August of 2013. You may recall that in the movie “The Perfect Storm”, weather conditions aligned to produce a massive destructive storm. Using that analogy, the “Perfect Energy Storm” is when government regulations, fuel supply, and market factors work together to drive up electricity costs.


In June of this year I upgraded the “Perfect Energy Storm Watch” to a “Warning.” As we move into the fall and winter months it appears that the initial effects of that storm are upon us.


As we went into last winter there was more natural gas storage than had ever been stored. Natural gas prices were low and generation costs appeared stable. SWRE had not had a Power Cost Adjustment (the portion of the cost of generation by Western Farmers that is passed through to our members) in over two years.


The Polar Vortex and a series of winter storms engulfed the entire nation resulting in record-breaking low temperatures. Actually March 1st was the coldest winter peaking day last winter for Western Farmers Electric Cooperative, our power provider. In a very short time natural gas prices soared, as well as propane prices.


The impact of the severe winter was that a record amount of natural gas storage was depleted and natural gas prices still have not retreated to early winter lows of 2013. Those late winter events continued to have an impact on the electrical generation prices throughout the summer .


In the recent weeks we have been able to lower the PCA significantly, but as our costs begin to moderate,


CALL OKIE or TEXAS811 Before You Dig Texas


Planting a tree? Installing a fence or pool? Be sure to CALL OKIE (in Oklahoma) or TEXAS811 (in Texas) before you dig. State Law in both Texas and Oklahoma requires excavators to call 48 hours prior to digging.


Since many utility services are located underground, digging activity always carries disaster


potential if the excavator doesn’t know where utility lines are located.


CALL OKIE or TEXAS 811 at least 48 hours prior to digging, and lines in the affected area will be marked so that you can dig safely.


by Mike R. Hagy


the coming winter may pose some new problems. In addition to some of the EPA regulations beginning to affect costs, there are a couple of additional problems on the horizon.


The storage level of natural gas is not at the level of past years. Will this lack of storage cause prices to rise more quickly? Also, because oil and gas pipelines have been delayed or not built, trains that were deliver- ing coal have now been diverted to delivering crude oil by rail. The resulting effect is that coal plants that had 90-day supplies of coal going into the winter are now down to 15-to-30 day supplies in many cases. Conse- quently, coal plants may have to de-rate or shut down generation which could also affect the cost of power this fall and winter!


I truly hope that natural gas storage and prices go back to those moderate levels of last year. I also hope that we have a short-lived and mild winter. I hope that the short supply of coal inventories does not factor in to higher generation costs this winter.


I hope that none of these concerns materialize, but I do want you to know the facts and the possible scenarios. Another record-setting winter could drive up energy prices again, as initial EPA requirements and market prices also begin to impact the price of electric- ity.


We will do our best to provide you quality service at the most affordable price possible for our cooperative, while maintaining our vision of safety, service, and satisfaction.


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