HANSON – The Board of Selectmen on Tuesday, Jan. 4 discussed it’s purchasing of natural gas through a consolidation program with supplier Sprague Energy, the contract which is now up for renewal. Company representative Robert Savage attended the meeting remotely to provide information on the positives and negatives of continuing the program, said Town Administrator Lisa Green.
Savage has been working with such programs for about 13 years and Sprague has been providing Hanson’s natural gas for about 29 years, he said. The company has been in existence since the late 1800s.
“We take care of everybody from Gillette all the way down to little mom and pop shops,” Savage said. “At this point, you’re probably very aware about the things going on in the global economy. One of the things that we do specifically is keep an eye on natural gas an electricity.”
After hearing Savage’s presentation, Selectman Jim Hickey made a motion to accept a 22-month contract at .698 cents per therm, unless updated pricing information Savage sent Green on Wednesday, Jan. 5, the town can get a 27-month contract at .705 or less per therm.
Green and the company agreed on Friday, Jan. 7 to 27-month contract for .7080 cents per therm — a price that had originally been offered in connection with a 15-month contract. As Savage had indicated during the Jan. 4 meeting, as a commodity natural gast prices fluctuate all day, every day.
The board then voted to empower Green to accept a 27-month contract not to exceed .76 per therm or less – based on a firm price from another company.
Selectman Joe Weeks noted Bay Path is offering a price of .76, and asked if that should be the drop-dead price for a deal with Sprague Energy.
Savage said the natural gas market is “extremely, extremely volatile here in New England,” because pipelines have not been expanded since the late 1970s, when they were put in place and the demand for natural gas has increased.
“It creates what we call capacity problems so we literally can’t get enough natural gas into New England to be able to provide enough for everybody,” he said. Add in winter demand, and it causes “major spikes” in prices across the board, and could soon affect electricity costs, because the majority of electricity is produced by natural gas.
“All of that being said, the natural gas prices here in New England are usually volatile, but this year, they are exacerbated by global issues,” Savage said. Chiefly, those issues are the COVID-19 pandemic which has “wreaked havoc all they way around.”
Hanson’s current contract is paying for natural gas at a rate of 59.9 cents per therm, and expires at the end of January. Prices through EverSource are currently 76 cents per therm.
“The current rate we are able to offer you is 69 cents [per therm],” he said. “That varies on a daily basis because it’s a commodity, so it literally changes all day long every day.”
Savage said there is no indication the market will be changing in a positive direction and strongly recommended the town lock in another 12-month contract to at least get Hanson through this winter.
“Our thoughts [on the long-term outlook] is try to get through the next two winters,” he said, noting the company can offer either a 10-month (.673) or a 22-month (.698) contract at the same price per therm as of Monday, Jan. 3. But the numbers have now changed, he said.
He said contract pricing for a contract’s fixed price combines the “cheap months” of summer when there is less demand for natural gas, with the “expensive months of winter when it is leaned on heavily for heat.
Selectmen Chairman Matt Dyer asked if it would be smarter for the town to enter into a six-month contract to get the town into the “cheaper months” of the summer in order to negotiate a better price at that time.
“The problem is, there’s no ‘cheap gas’ to offset the cost of the expensive gas, and that’s why we we try to include those summer months … to give you a little more control,” Savage said. He advised the town lock in as many colder months, at a better price now, as they can.
“I wanted to go the opposite way,” Selectman Jim Hickey said. “A 10-month won’t get us through [next] winter. … the one with the two-year contract doesn’t get us through two winters, it only brings us to October . I’m looking to get both winters covered.”
Hickey advocated for a 26- or even a 28-month contract. Even if the price went up to 70.5 cents per therm, he argued, it would get Hanson through two entire winters, putting them at the end of March 2024 before they would be looking at another contract renewal. The present contract has been a 24-month pact.
“I know December, January and February would cost more at the end of it, but it would still make sense, in the long run, to get through those three months and then bring it back at the end of March 2024,” Hickey said.
Savage said that, or even a 26-month contract would make sense, in view of the recent price volitivity.
In July 2020, natural gas was trading at $1.50 per decatherm (or 15 cents per therm multiplied by 10), as of about two months ago, it was at $6.20 per decatherm. Right now it’s about $5 per decatherm.
“It’s extreme volatility and there’s nothing on the horizon that’s going to stop that,” Savage said.
Utility companies are already preparing for rolling winter blackouts throughout New England, he cautioned, because there may not be enough natural gas available to produce electricity if there is a prolonged cold spell.
Dyer asked about the potential for aggregation for a bulk purchase.
Savavage said his company treats all clients the same, regardless of size.
“We’re going to give you the same deal, whether you’ve got one, two, three or four towns on board with this,” he said. “I’m not going to change it for you, I’m not sticking it to you because you are one location. We treat all of our customers exactly the same.”
Aggregate pricing does not help responsible energy consumers when giving them the same price as wasteful customers, he argued.
Selectman Laura FitzGerald-Kemmett said she liked the suggestion of a 26-month contract. Hickey asked how soon pricing on a 26-month contract could be forwarded to the town administrator.
Savage said he would only need to get someone at corporate to let him into the system and it would take only five minutes to get them and would have them by Wednesday morning, Jan. 5.
Selectman Kenny Mitchell asked, in view of the fact that the board’s next meeting is Jan. 25, when would they need to move on a price. Savage said the company’s hedging deadline is three business days from the end of the month, so the town should be OK about locking in a price. But he urged caution because weather forecasters are signaling they are keeping an eye on western Canada, where “the most prolonged period of single-digit farenheit temperatures going back to at least the winter of 2013-14.”
“This cold snap took hold of western Canada on Dec. 25 … temperatures fell to 6 degrees F and averages -1 through Dec. 31,” he read from the weather saff’s email. “What’s in the west will typically follow the jet stream and come down across. So, behind the scenes, they think we’re going to come across some extremely cold weather within the next few weeks.”
It would be cutting it close, so he suggested making a decision sooner.
Selectmen could set up another virtual meeting next week to make that decision.