Hinsdale High School District 86 could see energy prices double when its current contracts expire next year.
The district now pays a pass-through rate of .031 per kilowatt hour for electricity, with a total annual cost of about $247,695. When the current contract expires in May 2023, prices are expected to jump in a new three-year contract to .060 per kilowatt hour with a total annual cost of $480,368.
That rate could go up to as much as .066 by the time the contract is finalized, energy consultant Becky Thompson of Nania Energy Advisors told board members at their Aug. 25 meeting.
“Electric and natural gas rates change every hour, every minute,” she said, noting a single headline could prompt a 20 percent increase in one day.
Natural gas prices are expected to increase from .284 per therm and an annual cost of $126,786 a year to .579 per therm and $258,438 in a new three-year contract. The district’s current contract expires in June 2023. That rate could increase to .637 by the time the contract is executed.
The current natural gas market, has been affected by a number of factors, Thompson noted, including lagging domestic production, increasing post-COVID demand, the Illinois Climate and Equitable Jobs Act and extreme weather. Russia’s invasion of Ukraine has also affected the demand for natural gas exports from the U.S.
“What we’re seeing right now really just boils down to a really nasty supply and demand disparity,” Thompson said.
This is coupled with a period of five or six years during which energy prices have been at historic lows.
“Your last contract was contracted with one of the lowest prices in the history of energy supply,” she said.
One piece of good news is the carbon credit ComEd customers have been receiving since June, which could add up to $20,000 for the district through May 2023.
Board members discussed whether to pursue a new two- or three-year contract, trying to determine whether rates will drop over the next three years. Debbie Levinthal said she was not sure how quickly European countries would be willing to buy natural gas from Russia, even if the war in Ukraine ends. Jeff Waters said he thinks they will after hearing of people in Amsterdam paying $1,400 a month to heat an 1,100-square-foot apartment.
Board members ultimately voted 7-0 to authorize Josh Stephenson, the district’s chief financial officer, to work with Thompson to negotiate a three-year contract at up to 10 percent higher than the prices provided in the bids.
Should energy prices drop, Thompson said, the district could pursue an “extend and blend” strategy by adding years to the contract and incorporating future savings into the current rate.
Thompson encouraged the board to act soon, as the market will become even more unpredictable once the weather gets colder.
“The closer that we get to heating season, the more volatility we are going to see,” she said.
