Case Study – Natural Gas Savings

The Future of Energy: How PRI is Changing the Game and Saved Illinois Clients $3,000,000

PRI specializes in mitigating financial and operational risks related to energy procurement and associated projects around the United States. Our clients include many property management companies, universities, and large commercial real estate groups. This case study highlights our dynamic strategies and client-focused approach to energy risk management.

PRI achieves excellent results for its clients utilizing in depth market analytics, pool buying power, and negotiating savvy with its suppliers.

In February 2021, PRI saved clients in Northern Illinois over $3,000,000 on their natural gas bills. We accomplished this by utilizing a variety of risk management strategies.

During the second and third weeks of February, the unprecedented cold 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.

Most natural gas users across the Midwest (and many other regions of the US) received notices from their suppliers that their February invoices were likely to be higher than expected due to the weather events that the area experienced.

As a result, the utilities declared Operational Flow Orders (OFWs) or Critical Days. These days, the utility will restrict how much gas can be delivered to each account, including gas injected into storage on behalf of each client. 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, and that did not give suppliers adequate time to plan and react appropriately. The critical days ultimately continued through February 19th.

We know of numerous accounts caught floating too much gas that ended up with invoices up to 10 times higher than anticipated. Fortunately, most Prospect Resources clients were largely insulated from these extreme and painful price hikes. Our unique procurement strategies – layered hedges, appropriate storage levels, in-depth market analytics, closely managed nominations, and daily management of large storage pools for our clients, are the main reasons for protecting from these severe market price spikes. Additionally, long-term and daily relationships with our suppliers allowed us to be very creative in our efforts to protect our clients from the huge hike in prices.

We calculated the financial impact of our management generated against many of our competitors who employ the standard fixed-rate contracts that are most common in the market. The results were very dramatic – in total, we saved our clients in Northern Illinois nearly $3,000,000.

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