We have seen power markets climb since mid-October. In the last week, market prices were up and then have fallen again in the last few days. Forward curves are now equivalent to last winter’s strip prices. On a relative basis, market prices are still competitive. Nothing to panic about, and ….there’s more to the story.

Winter 2012-2013 Prices Are Higher Than All Other Time Periods

The market price increases that we saw over the last week were not uniform.

Winter prices (Dec 2012- Feb 2013) increased more than any other market period, including, notably, the other major peak cost period, Summer 2013. Winter 2012-2013 is the blue line, while Winter 2013-2014 and 2014-2015 are red and green.

This coming Winter’s prices have been the most volatile, increasing dramatically and then dropping over the past few days, while the 2013-2014 and 2014-2015 Winter Power Prices have not increased significantly.

Summer 2013 Prices Have Not Increased Significantly

The average on peak and off peak prices for the 2013 Summer strip period (also in blue, right) remains relatively low. What is also important to know about the Summer period is that the 2015 (green line) and 2014 (red line) strip prices are higher than next Summer’s prices.

But what does this all mean?

Don’t Sign a Fixed Price Contract for a January Start Now, If You Can Avoid It

Now is not the time to sign a fixed price contract for a January start, if you can avoid it. In general, we advise our customers not to renew a fixed price supply contract immediately prior to contract termination.

Start to look at renewing your contract at least 3 to 4 months in advance. If your contract is renewing in some time in the Spring, then now is the time to think about that renewal. If you do have a contract coming up in the next few months, why not go to an index contract for the Winter months, and sign a fixed price that begins in March 2013?