Consequences of Historic Cold Temperatures on Energy Markets
This winter has been full of anomalies. Weather patterns, energy markets, and utility rates have all been outliers. After an extended stretch of seasonally frigid temperatures in New York from mid-November through year-end, the cold has returned. On January 24th, the temperature dropped below 32 degrees and stayed there for over a week while the Hudson River was frozen over. Just a few days later in February, below freezing temperatures are back.
To put this further into context, December and January were among the coldest periods in 15 years. The average high and low from January 24th through month-end were 22 and 12 degrees, respectively, nearly 20 degrees below historical averages. The first week and a half of February are only marginally warmer. This bitter cold stretch is truly historic for New York City.
The rest of the country also endured extended cold stretches, which were another critical piece of the puzzle, as heating demand was widespread and regions relied on for natural gas production froze. The repeated nature and magnitude of these near-record-breaking cold periods materially tightened energy commodity markets, increasing wholesale prices and ultimately resulting in higher utility costs.
The dynamics of the natural gas and electricity markets are closely linked. While New York continues to transition toward a cleaner energy mix, fossil fuels, particularly natural gas, still account for a substantial share of electricity generation. During periods of extreme cold, heating demand alone consumes significantly more gas, thereby raising the cost of gas. At the same time, power generators depend on that same fuel to meet baseline electricity needs across the grid.
Cold weather can further strain the system by impairing natural gas production. Freeze-offs occur when liquids within the gas stream solidify, restricting output precisely when demand is highest. With supply unable to respond and consumption elevated, prices rise quickly. In response, power producers are often forced to rely on higher-cost alternatives, amplifying the increase in both wholesale power prices and overall utility costs.
Con Ed and National Grid will observe rates in February comparable to winter 2022, when a similar weather-driven scenario drove up commodity prices. If you are entered into a third-party supply contract which allows the commodity to stay variable, costs are certain to rise to similar levels. New York’s electric commodity rate (referred to as “NYISO”) averaged $0.20 per kWh in January, the highest monthly level since Aurora began tracking this data 20 years ago. Certain bill periods that span mid-January to mid-February will likely exceed that. The gas commodity (referred to as “NYMEX”) settled at $0.7460 per therm in February, the highest rate since 2022.
However, there’s no need to panic. Over the course of a full year, this is little more than a blip on the radar. Supply represents only a portion of your total utility cost, with delivery making up the other side of the equation. And this period accounts for just a fraction of your annual energy consumption. Further, the New York Public Service Commission approved only a 3 to 4 percent increase in delivery rates for 2026, a far cry from the double-digit increase originally applied for. This “savings” on delivery should partly offset the spike in this month’s supply cost.
Also, Aurora’s energy budgets already projected a higher commodity price in the winter months, so the incremental variance to budget is not as significant as you may think. The total impact on your annual budget will likely be no more than 1 or 2 percent by year end. As each additional period beyond February passes, the early year variance to your budget will continue to shrink. Furthermore, commodity futures are trading at normal levels, even with the expected cold this coming week.
Though these weather-driven events have happened more frequently this decade, they are rare and typically occur every few years. Once we are past this cold stretch, market conditions should eventually revert to or closer to historic norms, as underlying fundamentals remain strong.
Market Analysis
Natural Gas
The NYMEX settlement for February closed at $7.46 per MMBtu, the highest rate since September 2022. As discussed above, anomalous cold stretches placed significant strain on demand and production, and the prompt month price more than doubled over the final 10 days of January. Working gas in storage is still 8 percent above this time last year and 5 percent above the five-year average, providing a case for the NYMEX to normalize as forecasts around the country warm up.
Electricity
The confluence of factors discussed above led to a perfect storm causing a sharp rise in the NYISO. The month of January averaged approximately $0.20 per kWh, while the daily average peaked at nearly $0.90 on January 28th. The daily average is still around $0.20 as of this writing in the first week of February.
Crude Oil
Crude oil futures were relatively stable in the $58 to $61 per barrel range until a late month run up ended January around $65. This was primarily caused by two factors. First, U.S. economic data showed faster than expected growth in the last quarter of 2025. Second, political tensions between the Trump administration and Iran further fueled market concerns.
💡 Mitchell’s Tip: Contact Aurora for guidance on local laws. Compliance season is upon us!