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How to Time Your Energy Purchase – TMT

Video Transcript

Hey guys! It’s Becky here with this week’s Two-Minute Tuesday. In keeping with our theme of kicking 2021 off on the right foot, I thought I’d address one of the commonly asked questions I receive from my clients: When should I go to market?

Now there’s no proverbial crystal ball. Everyone knows that. But we used to gauge patterns based off of following weather. So you wouldn’t buy gas in the winter, and you wouldn’t buy power in the summer.

But as the last couple of years have shown us, that doesn’t really exist anymore.

Factors Impacting the Energy Market

We had some of the lowest natural gas pricing in 20 years in March of last year when there was still snow on the ground. The year before that, the fourth of July in 2019 showed us ridiculously low electricity rates.

So how are you supposed to know when to go to market?

Well, let’s slow down and look at the facts.

Year over year, we know that natural gas is down about 25 percent from this time last year. While the rig count has be steadily increasing, it still hasn’t returned to its full capacity.

Meanwhile, exports of liquefied natural gas are at record all-time highs. They’re receiving $14 per MMBtu right now in China, whereas here domestically they’re getting a little over $2. So there’s definitely demand increasing for exports.

However, demand domestically hasn’t returned quite yet. We’ve had a very mild winter, and we’re still experiencing some of the effects of COVID-19 shutdowns. This summer should prove some volatility to return as demand comes back online for both natural gas and power. We hope that production will follow, but at this point it’s still not up to capacity.

That all said, how are you supposed to make a decision on when you should be looking at your options to make an energy purchase?

A Shift in Perspective

I’d encourage you to switch the conversation from savings to risk management. Are you willing to look at some options now and potentially pay a little bit higher than your current contract to have safety and security and lock in for the next three years? Or, are you willing to take on a little more risk and ride the market and see how the change in political parties or social and economic factors play out? How is the vaccine going to have an effect on shutdowns?

It could go either way, it just depends on the risk level that you’re comfortable with as an organization and what you’d like to see as an end result.

So, I’d encourage you to have the conversation now with your strategic energy advisor just so you’re on the same page. You can set up some market watches to start watching pricing if you’re not quite ready to take action yet. But at least you’ll be in the know when the opportunity arises to make your energy purchase.

Thanks so much for listening, and we’ll talk to you next week!

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Two-Minute Tuesday Recap

Video Transcript

Hi! This is Michael DeCaluwe from Nania Energy Advisors, and happy 2021!

You know, 2020 brought a lot of challenges. It meant working from home. It turned Amazon and Instacart into verbs. Your baby monitor is now next to your laptop. As we look into 2021, we want to review our Two-Minute Tuesdays — topics we covered last year and what we have planned moving forward.

In 2020, we reviewed such things as utility rebates, percentage swings and gas products, and what an energy advisor is and does. We try to keep these videos under two minutes, but it usually depends on who’s giving the video whether that’s successful or not.

The information we provide is geared to be actionable items that you can apply to your own individual energy strategy.

As we look to 2021, we’re excited to hit the ground running and continue to provide valuable content. If there’s any specific topics that you want to see covered, please feel free to reach out. Otherwise, look for further videos on Tuesdays, and good luck to you in 2021!

Have a Two-Minute Tuesday topic in mind? Reach out to our Content Marketing Manager AJ Brockman at abrockman@naniaenergy.com.

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What is a Price Trigger? – TMT

Video Transcript

Hi! Welcome to this week’s Two-Minute Tuesday where we’re going to be talking about strike prices and fixed price triggers. We’ll be answering some questions about what those are and when someone might use them.

Strike Price vs. Price Trigger

A strike price is more of a technical investment term. When you’re looking at purchasing natural gas and electricity, we’re most likely talking about a price trigger.

A price trigger is when a client authorizes a set market price that the market might go down to, at which point a transaction might be automatically executed or approved to be executed.

When should you use a price trigger?

Here are a few situations where that might be used.

1) Slower Decision Making/Authorization Process

The first is when you have a slower decision making or authorization process. Good examples of this are school boards or condominium associations where they need to have a group vote in order to approve a transaction.

Obviously this isn’t very conducive with market volatility and moving quickly on a price. So what they might do is approve a price trigger and a specific target to be executed in the near future. In this situation, it would be automatically executed based on that target price, so they don’t have to go back and get additional approvals.

2) Multiple transactions

Another situation where someone might use this is a large user who is making multiple transactions. Think of a data center or a large manufacturer for whom energy is a significant cost in the price of their product.

In this case, they’re making many transactions over time, and they want to streamline that process so they can execute more quickly based on market volatility. In this scenario, they may or may not execute automatically.

Often, there’s a buyer or someone in place who can make those decisions, and what they really want is to be notified when the price hits that level so they can give a quick yes or no and then the transaction would occur. But the transaction wouldn’t be slowed down by paperwork or needing to get things signed right at that moment; it’s all been done in advance with the price trigger.

3) Market Monitoring

The third scenario is for market monitoring purposes. We use this often when we’ve got a client with a contract that’s up at the end of the year, and maybe we’re looking to see if the market drops below the current price for a client and we want to take advantage of that.

So in that situation, there wouldn’t be an automatic execution, but that price trigger would set off a notification to let us know where the market’s at so we can look at it and bring it to a client for evaluation and then to potentially make a decision on that.

So those are three different scenarios with three slightly different outcomes on a price trigger. But the core point is setting and approving a target price at which some transaction or notification is going to be exercised in the future.

If you think price triggers might be a good fit for you or if you just have general questions, reach out to your energy advisor for further details.

As always, thanks for watching, and please comment, like, or share below!

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What Is Swing Percentage? – TMT

Video Transcript

If you watched last weekend’s Masters, you saw some pretty sweet swings out there. If you like Masters Champion Dustin Johnson, some might even say he had 100% swing.

In this week’s Two-Minute Tuesday, we talk about natural gas products and what “swing” means.

What is swing percentage?

Swing is a term used in natural gas products to determine how much you can deviate from your monthly usage. The most common products are 0% swing and 100% swing, but you could do something in between as well.

0% Swing vs. 100% Swing

For 0% swing or a fixed price per therm, your supplier will determine how much you use month in and month out based on historical data. You pay a fixed rate for that monthly quantity. Anything you use over that monthly nomination, you will pay the market rate for. Anything less than that, you will sell back to the market at the market rate.

For a 100% swing product, you pay the same fixed rate regardless of deviations in usage. Let’s look at an example.

Example

Say you use 10,000 therms every November. One November, this goes up to 11,000 therms. You were fortunate enough to lock in a rate of $.25/therm.

On a 100% swing product, you would pay $.25 per therm for all 11,000 therms.

For a typical fixed rate, or 0% swing, you would pay $.25 per therm for the first 10,000. But then you would pay the market rate, let’s say it’s $.28 per therm, for the remaining 1,000 therms.

Which swing percentage is better?

So, which is better: 0% swing or 100% swing.

The answer: it really depends on what you’re looking for and what your long-term strategy might be.

100% swing gives you budget certainty. You pay the same fixed rate regardless of deviation in usage in the coming year. Say you’re expecting increased production, maybe you’re adding new equipment, or you’re very risk averse and you’re worried about the cold winter coming up. 100% swing will give you protection from that.

On the other hand, if you’re not planning any major changes in the coming years and your usage has been pretty stable, a 0% swing product might be the best fit for you. Although there’s a little bit more risk involved with the 0% swing product, you get the advantage of paying a lower rate because there’s no risk premium included in the rate like there is with a 100% swing product.

So,  what might be happening in your facility in the near future plays a big role in choosing the right swing product for your gas needs.

When it comes to natural gas products, channel your inner Dustin Johnson and make sure you choose the right swing. If you need help choosing that swing, reach out to one of our advisors.

Thanks so much for watching! If you found this video helpful, please like, share, or comment below.

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Illinois Utility Rebates for Schools – TMT

This is a clip from our October webinar in which Senior Energy Advisor Becky Thompson chatted with Vanessa Perkins from Resource Innovations about utility rebates for schools.

Video Transcript

VP: I know that a lot of you are dealing with COVID right now as well, and it’s critical for you to have outside air coming in and ventilating through your building. And I know that’s going to cost more money because you’re going to have to heat and cool that air. Every new chunk of air has to be conditioned.

So some ways to have a quicker payback and better ROI is to look at the ways you’re heating and cooling that air and start in that area. Like a boiler tune-up, for example, and making sure your boiler is running at the optimal pace and has the optimal fuel-to-air ratio. Those types of things that might be considered “maintenance” might be covered by the utility programs.

So it’s always worth seeing, even if you’re not doing projects right now, just find out what’s laying around that could possibly be paid for by the utility or subsidized by the utility to help you start saving on costs that you’re experiencing. Especially with the outside air intake.

BT: And that’s such a great point because a lot of my districts are telling me that energy efficiency is low on the list right now. It’s all about student and staff wellness and health and safety. So they’re putting in the MERV filters and all of these kinds of things that are really decreasing their efficiency, and they’re doing it because they have to have a plan to reopen.

But eventually, that’s going to be a substantial cost that the district is going to have to take on. So, if I’m understanding what you’re saying correctly, maybe there’s not an incentive directly for increasing your indoor air quality. But some of the other pieces that affect that that are part of that process you can get money back for, so you can offset that cost so it’s not such a kick in the chin for you.

I know lighting, specifically, if you haven’t already done that it’s typically less than a year payback. And upgrading to LEDs reduces your lighting expenses by 80 percent and increases the efficiency by 80 percent. So within a year, your lights are paid for, and now you can take that money and maybe look at the some of the bigger projects that are maybe lower on the list that suddenly you have the money to fund them.

It’s all about shifting things around and just getting creative with that. It’s really important to know an efficiency program doesn’t just mean a new rooftop unit or a boiler replacement. There are so many ways that these programs operate and tons of money just sitting there ripe for the picking.

MOPR Is NOT Someone Who Sulks – TMT

Video Transcript

Hello, I’m Michael DeCaluwe, Senior Vice President at Nania Energy. Have you heard the term “MOPR” recently in energy conversations?

In this week’s Two-Minute Tuesday, we’re going to be talking about what exactly MOPR is and what it means for you.

What is MOPR?

As the title mentions, MOPR is NOT a pessimist who sulks. MOPR stands for “Minimum Offer Price Rule.” 

It’s a new rule created by FERC, the Federal Energy Regulatory Commission, which regulates our regional electricity grids. MOPR only applies to PJM, the electrical grid that includes northern Illinois, Ohio, Pennsylvania, New Jersey, and Maryland.

This rule covers how capacity costs are set in this market. As we’ve mentioned in previous videos, capacity is a reliability cost that is set to make sure that the grid has enough power to cover periods of peak energy use. Think summer days when it’s hot and everyone’s AC is on.

Over the past few years, some states have enacted renewable energy mandates that have provided subsidies for certain types of power generators such as wind, solar, and even nuclear.

Some generators have complained to FERC that the existence of these state subsidies have given an unfair advantage to some in competitive capacity auctions.

In response, FERC ruled that the current model for capacity auctions in PJM is unfair and decided to change it. This new model is MOPR.

What does MOPR do?

Under MOPR, PJM will set resource-specific price floors for capacity bids, meaning that each type of generation resources (nuclear, solar, coal, etc.) will have a minimum price that they must place in the capacity auction.

The first new auction under MOPR will likely take place next spring for the 2022/23 planning year.

What does this mean for you?

For electricity consumers in these areas, this will likely mean higher capacity prices due to the price floors set by MOPR. Capacity currently makes up about 25 percent of electricity costs in PJM but could be much higher going forward.

What can you do about it?

The best way to avoid these higher capacity costs is to limit your peak demands in the summer, starting in 2021. Enrolling in a peak day notification program or doing energy efficiency projects to lower your electricity usage and demand are two ways you can reduce your peak demand values and offset some of this coming price increase.

So although MOPR might make you sulk, there are things that you can do now to help you prepare for its effects.

Hope that you found this week’s information helpful, and please be sure to like or comment on this video.

Thanks for watching!

UV Lighting and Indoor Air Quality – TMT

Video Transcript

With people returning to the office, kids going back to school, and others remaining in their residential buildings, everyone is concerned about keeping shared spaces safe. One solution you may be hearing about is UV radiation in air ducts to improve indoor air quality and kill germs.

If you’re getting questions on this or it’s something you may be looking into in the near future, then this Two-Minute Tuesday video is for you. We’re going to talk about 3 things you need to know before looking into UV solutions.

1) Does it work?

The first thing you need to know is, does it work?

And the short answer is: yes. The right type of UV lighting can kill many germs, bacteria, and viruses. It can even help with mold spores and odors in the air.

Now according to the FDA, UV radiation — specifically UVC — has been shown to destroy proteins in other coronaviruses, ultimately leading to deactivation of the virus. Early findings support that it could be equally effective for COVID-19.

Which takes us to the second thing you need to know.

2) Not all UV lights are the same, and not all UV radiation is the same.

While UVA and UVB can kill some germs and bacteria, there is a specific wavelength of UVC that was used to successfully inactivate other coronaviruses, such as H1N1 and SARS.

Enough exposure to UVC-254 damages DNA so viruses can’t replicate. However, direct exposure is also dangerous to people, damaging both skin and eyes. This is why the strongest equipment has been used in medical applications for years, and why it’s installed in air ducts and not in the lobby.

When you’re evaluating UV lights themselves, make note of the type of UV (A, B, or C) and check the light rating. That’s an indication of its effectiveness.

Overall, the effectiveness is based on dose and duration, so power is important. Handheld wands, for example, have a very low dose, and it’s not enough to immediately damage a bacteria or virus. This means it would take prolonged exposure in order to render a virus inactive.

3) Work with an HVAC professional.

The last and most important point: this is NOT a DIY upgrade. You need to work with a professional.

You can buy lights on your own, and in some applications it may seem like an easy install. But there are a lot of ramifications throughout your building that can easily be overlooked. If adequate adjustments are not made to your HVAC system, you can overwork existing equipment or cause condensation issues throughout the entire building.

Be sure to consult an HVAC professional. They can:

  • Tell you whether your current HVAC system can handle UV radiation,
  • Identify the best types of lights that will work with your existing system, and
  • Make the necessary adjustments after they have been installed.

 

These are just a few quick things you should know in case you’re asked about UV lighting. Our November webinar will dive deeper into this topic. So if you’re getting questions or have further questions yourself, please share them in the comments section below, and we’ll be sure to address them in that webinar.

Take care, and thanks for watching!

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What does an energy advisor do? – TMT

Video Transcript

Hi! I’m Sam Greenberg, and I am a strategic energy advisor representing Nania across the Mid-Atlantic.

In this week’s Two-Minute Tuesday, I’m going to dive into specifically what energy advisors do, and how we can help your company through our services.

Energy Broker vs. Advisor

In one of our previous videos, my colleague Calvin talked about how advisors and brokers are similar but far from the same. To quickly recap, when put simply, a broker only shows up when it is time to renew your contract, regardless of where the market is at that time.

What we do as advisors is take an all-inclusive approach to energy management by:

  • monitoring the market for best times to buy,
  • helping you identify areas of opportunity like demand response, and
  • connecting you with some of the best resources across the country for completing an efficiency project.

The energy industry is complex, and energy procurement is even harder to navigate. It is our goal to make energy buying not only easy, but make it an area of opportunity for your company when it comes to budget stability and reducing expenses.

By consistently monitoring the market, keeping you up to speed with the newest regulations, and providing strategic advice for execution, being an energy advisor is an ever-evolving line of work. But, it’s one that is extremely rewarding when we see our clients being set up for success.

If you have any questions about your business or would like to speak further about taking advantage of your deregulated market for energy, feel free to reach out me or any of my colleagues. My contact information is below.

If you enjoyed this video, please like, share, and subscribe. Stay classy, energy clients.

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Technology and Energy Strategy – TMT

Video Transcript

By this point, the impact of COVID-19 has permeated our lives in almost every conceivable way. With the changes you’re facing, you’ve had to adapt to a world where almost everything is now online, including managing your energy strategy.

In this week’s Two-Minute Tuesday, we’re going to talk about a couple of ways you can leverage technology to save you time and money in the energy purchasing process.

Video Conferencing

The first way seems obvious, but it’s worth mentioning: digital communication and data exchange. In this day and age with so many ways to communicate, we are continuously surprised by how impersonal energy procurement can be. There’s nothing like meeting in person, but video conferencing is the next best thing.

Zoom, GoToMeeting, and Microsoft Teams all provide excellent platforms to see each other during meetings and to share and review data. Not only are video communications more personal, but they’re also more productive. More accomplished in less time means more time for you to dedicate elsewhere.

E-Signature

Speaking of saving time, e-signatures are next on our list, and they have skyrocketed in popularity for documents that require signatures. If you’re tired of negotiating with the scanner like me, e-signatures are going to be your best friend.

Reverse Auction

Another way we’re leveraging technology is with a reverse auction. If you’ve never heard of it, you’re going to want to take some notes.

The completely online procurement event has suppliers log in and compete against one another in real time in an online platform. The streamlined event can produce results up to 10 percent better than a traditional sealed bid. Couple that with a 15-minute time limit, and you save time and money all online.

Our workplace is definitely different than it was in January of this year, but that doesn’t mean that your productivity has to suffer. Our mission remains the same: make energy easy to make you successful.

If you’d like to learn more or just want to chat, hit me up and I’ll send you a Zoom invite. Thanks for watching!

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TMT: 3 Factors Impacting Your 2021 Energy Budget

Video Transcript

Hi! It’s Calvin, back with another Two-Minute Tuesday. It’s budget season, so this week we’re going to take a look at three macro factors that may impact energy budgets for Illinois customers in 2021.

Budget Factor 1: COVID-19

The first and most obvious factor is COVID-19 and the potential for a second wave later this year.

Initially, with stay-at-home orders, we were in a shoulder period when there wasn’t significant usage for heating or cooling. If there’s a second wave, it’s likely going to come during the heating season. So there’s a big potential for staying at home to increase usage, thus driving up natural gas costs.

Budget Factor 2: Clean Energy Legislation

The second major factor is Illinois clean energy legislation.

There’s legislation on the table right now that includes Northern Illinois being removed from the PJM market. What this means is Illinois residents and businesses will be paying a completely different structure for their capacity costs. The goal of this is to support renewable generation, which historically is higher cost, so it could lead to dramatically higher rates for capacity and overall electricity costs for Northern Illinois customers.

Budget Factor 3: Oil Prices

The third major factor, hot off the presses, is oil prices.

Over the weekend, OPEC announced that they are considering increasing production. They’re meeting tomorrow, July 15, to have discussions and potentially vote on increasing production starting in August. This means that they consider the market to be recovering or demand to be increasing in the future. It could just be wishful thinking on their part, but if they’re correct, then we could see a continuing increase in oil cost and, ultimately, energy rates for 2021.

 

So to recap, the three big things to keep an eye on for next year: COVID wave two, Illinois energy legislation, and OPEC’s discussion to increase production.

If you have questions on this or are looking for additional guidance in your budget planning for 2021, please feel free to reach out to us! You can give a call or email info@naniaenergy.com.

We thank you again for tuning in to another Two-Minute Tuesday, and if you found it helpful please like or comment below.