Easing energy prices slow to be passed on

ECONOMIC NAVIGATION AND SIGHTSEEING

August 03, 2008|By Jay Hancock

The most under-covered story the last two weeks is the plunge in the price of energy other than crude oil. It offers a little hope for lower future heating bills than we once might have expected.

Prices for electricity and natural gas have fallen even more than those of crude, which has won all the headlines and gone from $145 to $125 a barrel. Mid-Atlantic electricity for January delivery has fallen by 24 percent since early July. Natural gas is down about 20 percent.

To be sure, even declines of that magnitude won't free cash for a shopping spree or vacation. Natural gas prices are still higher than at any time since right after Hurricane Katrina in 2005. Electricity prices have fallen back to their levels of February and March, when nobody was calling kilowatts "cheap."

But if they hold up, the declines will make future utility bills lower than they might have been. Avoiding another bad hurricane and disruption of natural gas shipments on the Gulf Coast is key. So is the strength of the economy. The weaker the growth, the likelier electricity and gas prices will be to stay lower.

Baltimore Gas and Electric has already bought its electricity supply through next May. So cheaper wholesale electricity now won't affect BGE's standard rate this winter. But soon BGE will shop for future periods. And a continued decline could induce independent vendors to try to undercut BGE's standard price this fall.

For BGE's standard natural gas service, which moves with the natural gas spot price from month to month, the lower, the sooner, the better.

jay.hancock@baltsun.com

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