Con Edison Gas Cost Factor Adjustment
If your building is currently supplied with natural gas by Con Ed or has an expiring contract with a private energy supply company (“ESCO”), it will be wise to revisit your strategy heading into 2025 in order to maximize savings. Every January 1, Con Ed releases its annual adjustment to rebalance its supply side P&L. This adjustment either shows itself as a refund or a surcharge passed onto customers, and in 2025, it is a substantial surcharge of $0.0373 per therm. This increases the likelihood that economics of contracting with an ESCO for gas supply will be more attractive compared to remaining with Con Ed.
The New York State Public Service Commission (“PSC”), which regulates the rates and terms of service for the state’s utilities, requires that Con Ed remain financially breakeven on supply, though it is allowed to earn a profit on its delivery business. If revenues are higher than expenses during a 12-month period from September to August, Con Ed must reallocate this overcollection as a refund built into the following calendar year’s gas supply rate. Conversely, if revenues are lower than expenses, Con Ed is permitted to pass this shortfall along as a surcharge the next year.
The list of factors included in the adjustment calculations are quite expansive. It includes all of the pass-through costs deregulated customers face and changes in line loss, just to name a few. Fluctuations in revenues can sometimes be due to weather-driven demand as well. For example, in the 12-month period which the 2025 surcharge is based on, Con Ed collected $25 million less than the cost it paid for gas in what was an unseasonably warm winter, so weather may have been a factor this year.
Historically, when this surcharge is sizable, like it is in 2025, supply rates from ESCOs tend to be lower on average than what Con Ed charges, as the private markets do not face the same PSC breakeven mandate or business overhead. Furthermore, if you are already in contract with an ESCO, there is now greater likelihood of stronger savings compared to the utility, as the 2025 surcharge is over $0.01 more than 2024. For the fifth straight year and eighth time in the last nine years, the Con Ed adjustment has resulted in a surcharge.
At Aurora, we study and track all relevant data points. Con Ed’s gas cost factor adjustment is just one of many considered in our analyses of each unique account we work with, so we are able to provide sound, expert recommendations to our clients.
Market Analysis
Natural Gas
NYMEX futures began December around $3.20 per MMBtu, where it remained in the low $3 range until the back half of the month when a cold spell hit the Midwest and Northeast. Colder temperatures – and persistent heating demand – are forecasted as we turn the calendar, further supporting the run up of the NYMEX. Though there is ample gas in storage, about 4 percent above the 5-year average, the commodity surpassed $4 for the first time since January 2023.
Electricity
NYISO Zone J hovered in the $0.04 to $0.06 per kWh range for much of December. Daily average pricing surpassed $0.10 on a few occasions, driven by periods of frigid temperatures and natural gas heating demand. Natural gas is still the state’s top source for generating electricity. Expect more volatility as we progress through the winter months.
Crude Oil
Crude oil futures were relatively quiet in December. Price per barrel ended the year around $70, where it traded most of the month. Though the market reacted to various global news stories, as it always does, nothing moved the needle tremendously. Supply glut fears and Chinese economic data were among the many headlines. Analysts are generally projecting oil prices to fall in 2025 as supply outpaces demand.
💡 Mitchell’s Tip: Develop an LL97 carbon roadmap.
