A scorching summer can heavily impact your natural gas pricing. While you may associate natural gas primarily with winter heating, hot summers increase demand for gas-fired power plants to meet high air-conditioning loads. This elevated summer demand can drive up the commodity market and lower storage levels for winter, ultimately increasing your overall energy bills.
When triple-digit temperatures hit, the ripple effects are felt throughout the energy market. Here is a breakdown of exactly how a hot summer influences the natural gas pricing you see on your monthly utility bills.
The Power Plant Connection
The relationship between extreme heat and natural gas might seem counterintuitive at first. After all, you aren’t running your gas furnace on a sweltering July afternoon. However, you are likely running your air conditioning.
Because a significant portion of the nation’s electricity is generated by power plants fueled by natural gas, high temperatures lead to a massive surge in “power burn”. When millions of households and businesses crank up their air conditioners, electric power plants must consume more natural gas to keep up with the electricity demand. This increased consumption applies upward pressure on wholesale natural gas prices.
Disrupting Winter Storage
The summer months are historically the period when utility companies replenish their underground natural gas storage fields in preparation for the upcoming winter heating season. During a mild summer, natural gas supplies easily flow into storage, creating a comfortable surplus that helps keep winter prices stable. However, during a prolonged, excessively hot summer, much-needed natural gas is diverted away from storage and sent directly to power plants to generate electricity. If natural gas inventories fail to reach targeted levels before the cold weather arrives, supply becomes tight, creating price premiums and volatile winter rates.
Managing Your Energy Costs
You cannot control the weather, but you can manage how extreme temperatures affect your budget. By locking in a fixed-rate contract before summer demand peaks, you can shield your business from volatile pricing. AMRA Energy can help you navigate these summer energy impacts with custom solutions based on the individual needs of your company.