Monitoring natural gas prices

November 28, 2011

Will the EPA’s Cross-State Air Pollution Rule drive up the price of natural gas? That’s what some in the industry predict, but Wabash Valley Vice President, Power Supply Lee Wilmes says that there hasn’t been any significant price movement yet. While it’s widely recognized that the new rules will lead to significant shutdowns in the nation’s coal-fired generation fleet, and that will lead to more gas-fired generation, the expected increase in demand hasn’t affected costs.

“We know that the cost of 2014 natural gas is higher than 2013 gas, and 2013 gas is more expensive than 2012 gas, but we haven’t seen any movement in the overall price curve,” Lee explained. “We are aware that there may be additional dependence on natural gas resources in the future, so we’ll keep a close eye on making sure that we have enough gas hedged over the long term,” he added. “Our current hedging rolls in over a three-year period, and down the road, we may need to extend that. However, we haven’t made any fundamental changes to our strategy.”

Lee noted that a reduction in the nation’s coal-fired generation would also lead to the Holland plant being called upon more often, but any additional revenue would be offset by the higher costs of coal generation that provides the bulk of our power. “The Holland plant serves more as a good hedge for our power portfolio,” he added.