CLA Energy Program Provider Shares an Update on the Natural Gas and Electricity Markets
I’m excited about utility costs in 2023.
OK, before you assume that I’ve lost my mind, let me reiterate that I’m truly feeling positive about this year for many reasons – not the least of which is the much needed relief or downward movement we’ve started to experience in market prices for natural gas and electricity.
Although these changes may take some time to filter down through to suppliers’ and utilities’ prices and price offerings, it’s a very promising direction for today’s consumers.
First of all, let me clearly state that I am in no way diminishing the very real utility cost crises occurring in many markets across the U.S., where some laundromat owners are reporting the doubling and tripling of their monthly energy bills.
Just choosing one state as an example – among the three major utilities serving customers in California, I’ve heard of prices doubling in some cases, dating back to August 2021. Electricity prices in the state are 50 percent higher and natural gas prices are 8 percent higher than the rest of the country, according to a recent report by the U.S. Bureau of Labor Statistics. For laundry owners in California or other markets where utility costs are skyrocketing, I strongly believe that you must find a way to pass along these costs. No one wants to raise vend prices on their customers, but we’re all too familiar with increasing costs at the moment.
With that said, natural gas prices have seen a more significant drop since they directly affect what utilities and suppliers offer to their customers. Electricity prices have come down as well, but since natural gas is only a partial component of electricity, the drops in price haven’t been as drastic.
Consumers saw record prices reached in 2022 – in fact, some of the highest prices seen since the major price spikes back in 2008 and 2011-2012. Fortunately, as I write this article, natural gas prices have retreated to prices closer to where they were 18 months ago. The current market price is $3.70/MMBtu.
This price drop – which started in late August 2022 – is nothing that I’ve ever seen or experienced in my career, dating back to 2010. Given the sharp rises we saw last year, I’m still surprised that prices have come down this quickly.
Our firm was projecting this drop in price near the end of the first quarter of this year. And I saw predictions in 2022 that the market price for natural gas could go to $10/MMBtu and possibly all the way to $15/MMBtu, if temperatures got frigid. However, so far, it’s been the opposite – and, for the most part, it’s been a rather mild winter.
We were hearing predictions of a colder than normal winter, which seems to be the norm for the last several years. If you look back to 2016, the market price of natural gas has declined more than it has risen during the winter months.
Essentially, there are many factors that can determine utility prices these days – factors on which we never used to focus and that go beyond the basics of supply, demand, and the weather.
Natural Gas’ Wild Ride
On August 22, natural gas reached a ceiling of $9.30/MMBtu. As we moved into September, the monthly high reached $9.00/MMBtu, but by the end of the month, the price had retreated to $6.84.
Prices remained steady in October, then increased to a high point of $7.50 in November. In early December, prices declined sharply, before rising to a mark of $6.75 on December 13 – before arriving at their current position.
The above synopsis supports the graph I’ve provided below, showing natural gas market prices from July 2021 through the present:
Take Control of Your Utility Costs
This year should bring laundromat owners some great opportunities to secure their places in the market, even if they’re currently under contract or with a utility. (Of course, at this point, I need to mention that some store operators may not have the opportunity to work with an energy consultant or a supplier, simply because their utility/gas or electric provider doesn’t participate in deregulation. Telling owners they’re located in one of those areas is the toughest part of this business.)
I have had many conversations with laundry owners and current customers, going back to February and March of 2022, when natural gas prices began to rise sharply. And the overwhelming question was: should I lock in now or wait?
My advice in those situations is to never panic and never lock in a rate when prices are on the rise so steeply. I’ve witnessed too many people do this over the years, and it didn’t turn out well for them, as they locked in a high rate for a long term. Commodity markets – no matter what the product is – go up and down. No doubt, we always hope that the valleys are longer than the peaks and that we catch these valleys at the right time.
With that said, here are a few actions items for you and your laundry business to take advantage of, given the current market:
- The proper way to address increasing or decreasing energy costs is to look at historical prices over a period of 12, 24, or even 36 months – and use that information to help drive your decision on whether or not to lock in a price for a specific period or to choose an index/utility rate.
- Earlier I mentioned that you still can take advantage of market movement, even if you’re on a contract. Consultants and suppliers will negotiate contracts for forward or future starts, depending on how far out the start date is. Look at your contract’s ending date (if you have one) and use that to discuss your options with the current provider or consultant you work with. If you can lock in a price that’s equal to or lower than what you’re currently paying, I think that’s something you might want to seriously consider.
- If you don’t know if you’re eligible to take control of your energy costs through deregulation, you can investigate by asking your current utility representative or energy provider about these services. In addition, you can visit the Coin Laundry Association website – www.coinlaundry.org/membership/benefits/cla-energy-program – and fill out the information in order to have an energy professional research the opportunity for you.
All in all, I believe we’re in for some lower natural gas rates in 2023. However, as we have seen and experienced, prices can change quickly. If you haven’t reviewed your accounts in the last six months to a year, I would highly recommend doing so. This is time well spent and, if you can get out ahead of the next spike in energy prices, it will create one less headache and factor to worry about as you focus on running a successful laundromat business.
