The Problem with Defensive Strategies and Structures
Ever since the natural gas price spikes of late 2005 through 2006 (precipitated by the supply disruptions of Katrina and Rita) and continuing through the speculative bubble spike climaxing in 2008, folks on the consultant side of power procurement have enjoyed a fairly easy sell if they were talking to those loads who had the suitability inclusive of appropriate risk appetite to lock a heat rate and wait on natural gas prices to come back to earth. History supported that when NYMEX prices spiked above $8/MMBTU for spot prices, they were most likely going to move a lot higher pretty quickly and fall sometime soon, usually just as quickly. The visual of this is illustrated in the spot continuation monthly chart, below:
