What is your argument wrt to futures?Long-term natural gas supply contracts are not anchored to the spot market.
Electricity generators participate in the spot market only because they cannot forecast demand perfectly. If there is a polar vortex, they may have to buy much more natural gas than they forecast. However, they buy most of their natural gas through long-term contracts.
The spot market is very volatile because it is a residual market. The volumes are also very volatile. The average of the spot prices over any period is not the average price paid for natural gas over that period.
I did not say anything about futures. You quoted spot natural gas, not futures. If you want to look at futures, then that is a different argument.
NG futures match the HH spot price in direction/pattern on any meaningful tick. Because they're used as settlement reference.
Neither front month or 2nd month or any other term of NG futures match the electricity price.
Are these a misrepresentation of your points:
1.NJ Electricity prices are determined primarily by Natural Gas prices (purchased by the utils)
2.The prices they pay are unanchored to any known NG price
The logical conclusion of 1+2 is that the electricity prices are unknowable from any price benchmark of natural gas? Natural gas prices cause change in electricity price, but no correction for volatility or lag in actual natural gas price could correlate to electricity price?
Statistics: Posted by hunoraut — Tue Mar 11, 2025 3:25 am