Energy Edge understands that the COVID-19 pandemic is having a wide range of impacts on our clients and their operations. We are here to help in addressing issues related to electricity and natural gas supply arrangements. We’ve put together a list of some possible issues that could come up with your utility or competitive supplier as a result of the COVID-19 pandemic. Please let us know if you have any concerns in these areas, or any others.
Reliability of Service
At this point, we are not aware of any impacts to reliability of electricity and natural gas due to COVID-19. Electric and natural gas utilities, pipeline operators, competitive suppliers, and independent system operators are continuing to maintain normal operations at this time. If you experience any interruptions in service or service quality issues, please contact us so we can assist in addressing those issues.
Changes in Consumption
Many businesses and institutions are changing operations and, in some instances, temporarily shutting facilities down in response to COVID-19 and its related impacts. These changes can cause a departure from normal consumption levels of electricity and natural gas. Some electricity and natural gas supply contracts have usage bandwidth or material change clauses in them that are triggered if monthly usage deviates by more than a certain amount from normal, typically between 10% and 25%. Usage outside of the bandwidth or material change tolerance levels is generally settled at spot market prices. If you think the usage at any of your facilities may be altered by more than 10%, please contact us so that we can proactively address the usage change with your supplier. While we are hearing from some suppliers that they will be temporarily waiving these contract provisions, we believe it is important for clients to understand the rights and remedies related to usage variance in case business interruptions persist longer than expected.
Force Majeure Scenarios
Most electricity and natural gas supply agreements contain a force majeure clause, that generally states that either party can be relieved of its obligations under the agreement if they are prevented from performing due to events beyond their control (natural disasters, acts of war or terrorism, etc.) We have not heard of any electricity or natural gas suppliers declaring force majeure due to COVID-19, however we are monitoring this closely. If you have been forced to alter operations due to COVID-19 and those alterations are preventing you from meeting your obligations under supply agreements, that could constitute an event of force majeure. The specific circumstances of your situation will be important to evaluate, please contact us to discuss your specific situation.
Electricity and natural gas contracts typically contain provisions to address counterparty credit risk for both the supplier and the buyer. To date, we have not seen a material degradation in the creditworthiness of the competitive suppliers we work with. However, some suppliers have sought to invoke provisions in supply agreements to protect themselves from deteriorating buyer creditworthiness, and in some instances have demanded collateral or other forms of performance assurance. If you have received any communication from a supplier about creditworthiness, or are concerned that you may, please contact us so that we can review your supply agreement and assist you with this issue.
The team here at Energy Edge remains steadfast in our support of our clients. We are here for you if you need us, please don’t hesitate to reach out.