Understanding Forward Energy Markets: The Hidden Forecast Behind Your Energy Bill

For most business owners, energy prices feel unpredictable. One year rates drop, the next they spike, and everyone seems to blame something different: weather, politics, global supply chains. What’s actually driving these swings isn’t random at all. It’s the forward energy market, and understanding it is one of the best ways to make smarter decisions about your electricity or natural gas contracts.

Let’s break down what that actually means and why it matters.

A “forward market” is like the stock market for energy.
Instead of trading shares of companies, energy suppliers and utilities trade contracts for future electricity or gas delivery.

When you see a 12-month or 36-month fixed rate offer, that rate is built on where suppliers think the market will be in the future. If wholesale prices are high, fixed rates rise. If the market expects cheaper energy next year, fixed rates fall.

Think of it like locking in your mortgage rate. The lender looks at the economy, interest rates, and risk, then prices your loan accordingly. Energy suppliers do the same thing, just with power instead of money.

Forward prices change daily based on expectations about supply and demand. The most common drivers include:

a) Weather patterns
Warmer winters or cooler summers reduce demand, which lowers forward prices. Severe weather has the opposite effect. A mild winter in 2023, for example, helped drive New England forward prices down more than 30% from the 2022 peak.

b) Natural gas prices
Because most U.S. electricity generation still depends on natural gas, wholesale power prices follow gas futures closely. When NYMEX gas trades lower, electricity forward prices usually follow.

c) Global events and fuel supply
Geopolitical shocks, pipeline outages, or LNG export disruptions can move the entire curve. The Russia-Ukraine conflict, for instance, pushed forward prices to 14-year highs before easing in 2023.

d) Grid demand and capacity
ISO-New England and other system operators run capacity auctions to ensure there’s enough power supply. When capacity costs rise, so do retail rates, even if energy prices fall.

When you shop for energy, the supplier is essentially buying your future power in the forward market.
If that market looks volatile, they’ll add a risk premium to protect themselves. If the market stabilizes, they’ll price more aggressively.

That’s why rates can change from one week to the next, even when your usage hasn’t changed at all.

In late 2022, a 3-year fixed electricity rate in New England was around 14 cents per kWh. By early 2023, the same term dropped to about 10.5 cents. The market didn’t suddenly get “cheaper.” It simply priced in lower forward expectations for natural gas and demand.

Timing matters more than most people realize.

You don’t need to become an energy trader, but you can use forward market insights to your advantage:

Check market trends before renewal.
Ask your supplier or broker for a forward price curve. If future years are trending lower, consider shorter terms and re-pricing later. If they’re trending higher, locking in longer can protect your budget.

Compare rates, not stories.
If two suppliers quote different rates, ask what forward assumptions they’re using. Sometimes one supplier is betting on lower future costs while another is being more cautious.

Understand inclusions.
All-inclusive vs. pass-through contracts can look similar on paper but react very differently when capacity or fuel costs change.

Forward markets tell you what the industry expects, not just what you’re paying today.
They’re an early warning system. When those futures start climbing, it often means retail rates will follow in the coming months.

If you wait until your contract expires, you lose leverage. But if you track where the market is headed, you can plan renewals around favorable windows and protect your budget from volatility.

Energy markets are complex, but they’re not impossible to understand. The forward market is simply a forecast that drives the price you see on your next contract. The more you understand it, the less “random” your energy costs feel.

At RePulse Energy Partners, we keep an eye on these market signals every day and help businesses use them to make informed decisions — not guesses.
Whether rates rise or fall, knowledge is the one thing that always pays off.

Learn more at: repulseenergy.com