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Latest Cold Snap Spikes Prices of Natural Gas, Puts Strain on Power Grid

Grid operator urges customers to dial back power usage; strategy typically taken during heat waves, not single-digit weather


How cold has it been in New Jersey and elsewhere? Frigid enough to spike natural-gas prices to their biggest monthly gain of 19.3 percent in January since September 2009, according to S&P Dow Jones Indices.

Bad news for consumers? Not necessarily, but in the long run it might be.

Actually, there's good news for many customers when it comes to natural-gas heat and electricity, since most are locked into long-term contracts that will shield them from big increases in their bills because of the rising prices of natural gas.

Businesses without fixed-price contracts, however, can expect an unwelcome jolt on their next utility bill.

Still, the abnormally low temperatures are undoubtedly spurring both homeowners and businesses to jack up their thermostats, a move that will increase energy consumption and lead to higher bills -- regardless of fixed-price contracts..

The unusual cold wave has been enough to lead utilities in New Jersey to ask their customers to conserve energy use and to spur the regional operator of the largest electricity grid to win approval to exceed a cap on power prices suppliers can charge to ensure there is enough juice to keep the lights on.

Typically, the call to conserve energy use occurs in summer months, when a heat wave taxes the power system and air conditioners -- as well as other energy-dependent appliances – are running non-stop. It may not be as effective in the winter, when temperatures drop into the single digits and people are less likely to be outside.

This winter, however, the cold wave has taxed the power grid to an unusual degree. “We really haven’t had much of a break in the cold since the beginning of the month,’’ said Ray Dotter, a spokesman for PJM Interconnection, the operator of the power grid stretching from the Eastern Seaboard to Illinois.

In January alone, the grid operator has experienced seven of the highest peak-demand days for electricity in winter it has recorded in this century, including the record peak winter demand on January 7, Dotter said.

That has helped drive natural-gas prices upward. In a 10-day period ending on January 24, 2014, natural-gas prices gained an “astonishing’’ 25.9 percent, according to Jodie Gunzberg, vice president of commodity indices at S&P Dow Jones Indices.

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