CASE STUDY

Natural Gas Savings

How PRI is Changing the Game and Saved Illinois Clients $3,000,000

Northern Illinois suffered an unusually brutal cold spell during the second and third weeks of February 2021. The unprecedented weather event caused significant natural gas delivery system challenges. Natural gas supply decreased due to production issues such as wellhead freeze-offs, while demand for gas surged and caused severe price spikes throughout the country.

As a result, the utilities declared Operational Flow Orders (OFWs) or Critical Days, during which the utility restricts how much storage gas can be delivered to each account. Daily spot prices at the Chicago Citygate traded as high as $12.98 per therm – about 40 times higher (!!!) than recent prices for February. Complicating the matter was that the Critical Days were announced on Friday, 2/12/21, going into a holiday weekend, not allowing suppliers adequate time to plan and react appropriately.

Most natural gas users across the Midwest (and many other regions of the US) received notices from their suppliers that February invoices were likely to be higher than expected due to the weather events. Many clients in the Midwest ended up with invoices up to 10 times higher than anticipated.

Fortunately, Prospect Resources clients were largely insulated from these extreme and painful price hikes. Our unique procurement strategies which incorporate layered hedges, appropriate storage levels, in-depth market analytics, closely managed nominations, and daily management of large storage pools for our clients, who were largely protected from these severe market price spikes. Additionally, long-term relationships with our suppliers allowed us to be very creative in our efforts to protect our clients from the huge hike in prices.

The savings generated during those two weeks in Northern Illinois, as compared to many of our competitors who employ the standard fixed-rate contracts, were nearly $3,000,000.