Tag: Market updates

It’s already that time of the year: we are preparing for the 2025-2026 winter season! Vicinity Energy is evaluating weather patterns and trends in the natural gas market to inform our customers of potential price volatility.

Vicinity carefully considers and implements risk mitigation strategies to ensure both reliability of supply and the lowest possible commodity deployment to limit exposure to volatile energy markets.

As fuel prices fluctuate, district energy customers rely on Vicinity’s multiple fuel sources to ensure reliable energy delivery and redundancy. Last winter, natural gas spot prices spiked as extreme cold weather drove heating demand sharply higher, compounded by low storage levels and other supply constraints. Vicinity was able to leverage backup distillate fuel supplies to maintain reliability during gas curtailment and price increase.

Natural gas prices forecast by the numbers 

Looking ahead to this winter, market expectations for natural gas prices will be shaped by several key factors: LNG exports, domestic production, gas inventory levels, and La Niña weather patterns.

Henry Hub natural gas price forecast 

According to the U.S. Energy Information Administration (EIA), the Henry Hub natural gas spot price is projected to average $3.40/MMBtu in 2025, rising to $3.90 MMBtu in 2026. This increase is largely driven by growing liquefied natural gas (LNG) export demand, as several new export terminals in the US Gulf Coast are expected to come online. U.S. LNG export capacity is forecast to expand from the current 17 Bcf/d to nearly 20 Bcf/d in 2026, and close to 22 Bcf/d in 2027.

As of October 3^rd, 2025, the November NYMEX Henry Hub natural gas futures contract settled at $3.32/MMBtu, and current forward markets indicate that the Henry Hub price will average about $3.71/MMBtu in November 2025 through December of 2026.

Natural gas price forecast: winter 2025-2026 

The prompt winter November 25 – March 2026 strip is currently hovering about $3.95/MMBTU.

Natural gas storage levels are a critical indicator of natural gas prices, and last year’s trends highlight the market’s sensitivity to supply constraints and demand increase.

A resilient production run rate of 107 Bcf/d, together with an early tapering of summer demand and prolonged seasonal LNG maintenance, enabled storage levels to recover to historical norms. As a result, U.S. natural gas inventories are expected to enter this winter at 3.9 Tcf, about 6% above the five-year average, signaling a healthy supply outlook.

The National Weather Service’s Climate Prediction Center is projecting a La Niña pattern heading into Winter 2025–26. Historically, La Niña winters have produced colder conditions across the North and West, and warmer, wetter conditions across much of the East. This setup increases the potential for mid-winter nor’easters and price volatility, echoing past La Niña events such as the 2014 Polar Vortex, Winter Storm Uri (Feb 2021), and the February 2025 cold blast that impacted much of the Northeast.

How can Vicinity help? 

Vicinity’s team of experts is continuously taking action to mitigate potential price spikes for our customers, especially during periods of high usage.

In addition to continuously monitoring the markets and leveraging our considerable backup distillate fuel supplies, Vicinity has proactively procured a portion of our fuel supply ahead of the winter season to help ensure efficiency and reliability. Our market experts believe this approach will serve our customers’ best interests and achieve more bill stability and budget visibility.

What can customers do to keep costs down during the winter?

• Take steps to minimize energy use
• Lower thermostat settings to at least 65 degrees when buildings are occupied
• Lower thermostat settings an additional 5 to 10 degrees when buildings are vacant
• Lower temperature settings on water heaters and limit the use of hot water when possible
• Open blinds and shades to take advantage of the sun’s natural heat during the day and close shades at night to reduce heat loss through windows
• Shut down any non-essential equipment
• Temporarily close buildings and encourage employees to work from home so you can keep building temperatures lower throughout the day

Utilize winter preparedness resources: View our winter preparedness checklist to ensure optimal system performance during extreme weather.

Inspections and trap maintenance/insulation: request inspections by Vicinity team to ensure your equipment is optimized for efficient energy use.

Electrification progress

Throughout 2025, Vicinity has remained committed to transitioning our district energy systems away from fossil fuels and has made significant progress electrifying our operations.

In June, Vicinity officially kicked off its Grand Rapids electrification plans by commencing the installation of our newest electric boiler. When the electric boiler enters service in 2026, over 120 of Vicinity’s customers in Grand Rapids will have access to eSteam^TM, carbon-free thermal energy, instantly.

In the coming years, we will continue to transform our facilities across the country by electrifying our operations with innovative technologies such as industrial-scale electric boilers, heat pumps, and thermal storage systems.

For questions on how Vicinity can support your businesses’ sustainability goals, reach out to our team. 

The information in this blog post is for informational purposes only and is based on sources believed to be reliable. However, Vicinity does not represent or warrant as to its accuracy or completeness. This content does not constitute financial, investment, or trading advice. Any decisions based on this information are made at your own risk. Vicinity is not responsible for any errors, omissions, or reliance on this material.

Energy bills for Pennsylvania-New Jersey-Maryland Interconnection (PJM) customers are expected to increase by about 30% this year. This is due to a significant rise in capacity pricing passed from PJM to electric suppliers, and ultimately, PJM customers.

Capacity prices increased because of record-high bids secured during the PJM capacity auction last year. Prices continued to rise at this year’s auction, increasing by another 22% that will go into effect starting June 2026 – May 2027. As the demand for energy grows in this region, there’s a greater need for capacity to supply peak-demand days.

In this post, we’ll review what this means for PJM customers and what you can do to reduce costs on your energy bill over the next few years.

What is the PJM capacity auction?

The PJM Base Residual Auction (BRA) is an annual capacity auction where energy suppliers bid on future capacity commitments within the Mid-Atlantic region. PJM holds this auction each year to ensure sufficient load capacity to handle demand increases on the grid in future planning years.

Through the auction, PJM secures forward commitments from generators, demand response providers, and other capacity resources to be available during future periods of peak demand. These resources are compensated with a fixed capacity payment in exchange for their obligation to perform when needed. This ensures that, even in extreme conditions, PJM has sufficient reliable resources committed ahead of time — reducing the risk of shortages or system stress.

How does the PJM capacity auction work?

The PJM BRA auction takes place annually, with results affecting capacity prices 1-3 years into the future. PJM studies the amount of capacity needed and evaluates multiple variables that influence demand on the grid.

The PJM capacity auction sets a fixed price for capacity for a future delivery year. Load-serving entities (such as utilities or retail suppliers) pay this charge to PJM in exchange for access to sufficient generation capacity during peak demand periods. While the capacity rate is fixed for the year, a customer’s monthly capacity charge may vary depending on their contribution to the system’s peak (known as their Peak Load Contribution or PLC). These costs are typically passed through to end users as part of the supply or transmission component of their electric bill.

PJM auction results (2025)

In 2024, the PJM capacity auction cleared record highs, increasing from about $28 to over $250 for some customers. These increases affected the following companies in their respective states:

Additionally, it’s important to note that price increases vary by region. For example, PJM customers in Baltimore experienced a higher increase due to multiple grid factors in that area.

PJM auction results (2026)

In July 2025, PJM announced the results of the 2026/2027 auction. Like the 2024 auction event, PJM anticipated greater demand for energy, and procured 134,311MW of generation resources The greater demand for energy led to higher capacity prices, and in this auction, prices hit the FERC approved cap, increasing by another 22% to an RTO wide clearing price of $329.17/MW-Day.

What does this mean for PJM customers?

Electric customers within the PJM service territory should prepare for a 30% increase in their energy bills starting in June 2025. The next PJM capacity auction for the 2027/2028 delivery year is scheduled for December 2025 and is expected to clear at levels similar to the most recent results.

It’s important to note that electric suppliers are not dictating this charge. It’s passed along as a fixed rate from PJM and attached to the energy bill.

Why are my energy bills increasing?

Capacity prices are increasing due to greater demand on the energy grid and fewer generators in service to meet those needs. As artificial intelligence adds more stress on data centers around the country, more capacity is needed to meet energy demands on high-use days. Maryland, for example, is home to dozens of data centers, which puts more demand on their energy grid. That will naturally increase the price of capacity because PJM needs to supply more energy on peak-demand days. AI’s effect on the energy grid is a common trend that will likely impact suppliers throughout the rest of the country.

Additionally, there are fewer electric generators available to supply energy during this capacity auction. Older generators in this region are being retired due to inefficiencies and decarbonization efforts, leaving fewer providers available to supply energy to these regions. While renewable energy resources are growing, their intermittency—even when paired with battery storage—limits their ability to fully replace the consistent output of retiring thermal generators.

Since there’s greater demand on the grid and fewer generators to meet that demand, those converging factors led to a record-high increase in capacity pricing.

What can PJM customers do to keep costs down?

If you’re a PJM customer, here’s what you can do to keep your energy bills down.

1. Review these seasonal preparation resources.

We’ve put together a few seasonal checklists designed to help building and facility managers prepare for seasonal procedures. They ensure proactive building readiness for summer temperatures, maximize equipment lifespan, and improve overall energy efficiency.

Check out our summer seasonal checklist to prepare for the upcoming season, and here’s our winter checklist as well, so you can save it for later.

2. Measure usage patterns in your facility or building(s). 

The better you understand your energy usage, the easier it is to limit usage and minimize your energy bill. Consider using resources like metering and sub-metering tools to get a feel for how much energy you’re using per department, equipment, or floor. If you’re noticing one area of your property is using more energy than expected, consider using some of the best practices in the next section to reduce your overall usage.

3. Minimize energy usage by following efficiency best practices.  

Here are four ways you can minimize energy use in your building:

• Set thermostat settings based on building occupancy.
• Close blinds and shades during the day to keep offices cool.
• Shut down any non-essential equipment.
• Temporarily close buildings and encourage employees to work from home so you can keep building temperatures lower throughout the day.

4. Monitor the PJM capacity auction.  

Some PJM customers may be surprised by this increase and wonder what they can do to prepare themselves for future changes in the energy market. PJM’s website provides consistent updates on its capacity auction, including key submission dates and milestones to monitor throughout the year. It also provides tools and helpful resources for PJM customers who are looking to learn more about the energy market in their area.

Next steps for PJM customers

PJM customers should prepare for this increase to affect their energy bills starting in June 2025. While capacity prices forecast high until 2028, you can monitor market trends on PJM’s website and follow the steps above to limit energy usage in your facilities. While we’re unsure how prices will change during the next capacity auction, it’s important to keep an eye on this market and understand how these factors can increase demand on your energy grid.

Reach out to your Vicinity Energy account manager with any questions or concerns.

Since June 2020, when COVID-19 shut down much of the U.S. economy, natural gas prices have been up a staggering 525%. Put differently, today’s gas prices have skyrocketed to levels unseen since 2008—and several factors could continue to drive prices even higher.

With the ongoing war in the Ukraine and uncertainty in Europe, an increase in liquefied natural gas (LNG) exports, and warmer-than-average summer temperatures in much of the U.S., natural gas inventories are below historical averages. This leaves the market with less of a buffer going into peak winter heating season demand, providing potential upside price risk. While we have recently seen some modest dips in gas prices, Vicinity is still seeing record highs in many of the cities we serve.

By the numbers: what we know and what we could expect

According to the U.S. Energy Information Administration, the Henry Hub natural gas spot price averaged $8.80 per million British thermal units (MMBtu) in August, up from $7.28/MMBtu in July. September’s Henry Hub spot price settlement was $7.99/MMBtu versus $5.024/MMBtu seen during the same period last year.

The October NYMEX Henry Hub contract settled at $6.868/MMBtu, and the expectation is that the Henry Hub price will average about $5.76/MMBtu in November through December of 2022 and then fall to an average of about $5.18/MMBtu in 2023 as U.S. natural gas production rises. So even though there seem to be some price increases in our future, the hope is that the new year could start to bring some stabilization. After record-setting demand for power generation this past summer, seasonal demand is set to reduce in the next few months.

How is Vicinity helping?

Because of the uncertain environment, Vicinity is taking action to cost-effectively procure fuel and reduce price volatility to limit our customers’ exposure to price spikes during the prime heating season this winter.

In addition to continuously monitoring the markets and leveraging our considerable backup distillate fuel supplies, we’ll be pre-purchasing fuel to help ensure efficiency and reliability. Our market experts believe this approach will serve our customers’ best interests and achieve more bill stability and budget visibility.

The global movement away from fossil fuels

Without a doubt, there are challenges ahead for all building owners that rely on natural gas – and not just in terms of cost. As reliance on fossil fuels continues to exacerbate climate-related impacts and global leaders implement legislation to aggressively reduce carbon emissions, it’s clear that natural gas is not a progressive or healthy solution for our collective future.

Of course, some critics raise concerns about renewable energy’s cost and affordability. Still, the fact remains that our current energy crisis has affected everyone financially and reinforces the obvious—that fossil fuels are the elephant in the room.

However, despite the global energy shortage, Vicinity is well equipped to navigate these challenging times—unlike buildings with boilers that rely solely on natural gas. With multiple power supplies, backup generation, and several water and fuel sources, district energy systems are reliable, robust, and sustainable and provide safeguards to ensure 24/7 energy delivery.

Like Vicinity, many leading district energy systems (including those in Vancouver and Copenhagen) are implementing innovative strategies, like renewable fuels, heat pumps, and electric boilers, to further reduce their use and reliance on fossil fuels.

Vicinity’s Chief Customer Officer Jackie Bliss said it best in her recent article with Commonwealth Magazine:

“There will always be reasons not to act swiftly in our transition to a greener, cleaner economy, but now is not the time to lose resolve. Rather, the recent fears about energy security mean we should immediately triple down on our investment in renewables. That means more offshore wind and solar if it accomplishes our shared goals of improved energy security while also combatting climate change, an existential threat to our planet and future generations.”

A closer look: the advantages of district energy

While the global energy shortage will impact everyone, there are substantial benefits to being part of a district energy system. Here are a few ways Vicinity’s status as a district energy provider will help serve our customers through this global challenge:

• We can negotiate fixed prices and better rates due to our superior bargaining power as a participant in energy markets, compared to a single building purchasing gas for its boilers.
• Vicinity monitors customer usage carefully to ensure enough supply to keep all our customers functioning at their normal levels, even during an extreme weather event or a shortage. This is a huge advantage over individual boilers, where building owners must try to anticipate their load and make sure to order enough on an individual basis.
• Most Vicinity district systems are fuel-agnostic, meaning our generators (chillers, boilers, etc.) can utilize various fuels, including renewable and alternative fuels, instead of being at the mercy of gas companies.
• Vicinity uses a diverse fuel mix, including renewable biogenic fuel, so we’re not reliant on natural gas.
• Furthermore, with the electric grid’s growing adoption of more renewable sources, we’re working on electrifying our district systems – a move that will drastically reduce our use of natural gas and conventional fossil fuel.

Looking ahead

There’s no question that we have a substantial problem on our hands. But the truth is, the solution isn’t only obvious—it’s already here. With so much uncertainty in tomorrow’s landscape, we need to recognize that what once seemed to be the answer is simply failing to keep up with today’s realities.

Isn’t it time we pivot away from fossil fuels and create a greener, more sustainable future?

The benefits of renewable energy will far outweigh the consequences of fueling the current solution. And district energy is just one example of how we can benefit from existing infrastructure (which reduces cost and saves space) to create a lower carbon footprint and a more reliable and affordable way to power us into the future.

The responsibility is now on us, and we have the forward-thinking means to start achieving energy security and a cleaner tomorrow right now—before we pay the price.