Category Archives: winter heating

Richard Meyer WINTER BILLS SET TO DROP THIS SEASON

Winter is nearly in the air. At the American Gas Association, that means it’s time for another winter heating season outlook for customer heating bills. This year the fundamentals are positioned such that we expect customers will pay less on their heating bills than last year.

Amid abundant supplies, near normal temperatures, and a moderate increase in natural gas demand, we anticipate residential natural gas bills to be the second-lowest we’ve seen during the past decade. AGA’s Policy Analysis group estimates a 5 to 7 percent decrease in bills this winter, meaning good news for homes and businesses.

There are three principal factors at play, two of which are subject to varying amounts of uncertainty.

The first, of course, is weather. AGA’s outlook is based on a National Weather Service forecast, which anticipates a warmer-than-normal winter. Its forecast has 2 percent fewer heating degree days (warmer) this winter than the 1980-2010 average. This, in turn, translates to approximately three percent less natural gas demand for home heating loads.

Cooler weather in the southern half of the US would be balanced by warmer-than-average temperatures in the North. However, since the northern states tend to be higher consumers of natural gas, the net effect would likely be a decline in residential gas consumption.

Weather Map

NWS forecasts two percent fewer heating degree days (warmer temperatures) this winter.

Weather represents the biggest area of uncertainty in this outlook. A colder winter will boost heating demand and the amount of gas consumed by households. If temperatures are warmer than expected, bills might be even lower.

Meanwhile, the price of natural gas remains low and is expected to remain so this winter. The Energy Information Administration’s Short-term Energy Outlook (September 2015) projects lower residential natural gas prices compared with 2014. A comparison of November through March for this winter compared with last shows a 5 percent decline in delivered prices.

Price outlooks always carry a degree of uncertainty as well. Commodity prices could rise or fall in the face of cold or warm weather events or supply disruptions. However, as we’ve seen during the past few winter seasons, weather-induced price movements have been relatively muted, acting more as short-term signals to suppliers.

With robust supplies and infrastructure in place, there’s every reason to expect the relatively low and stable pricing regime to continue, even amid short-term fluctuations in commodity prices. Furthermore, natural gas utilities maintain supply portfolios that include both physical and financial positions in order to manage variance in the market. This adds further price and supply stability during the winter months.

Finally, our third factor: average household gas usage, which continues to decline. Based on EIA data on residential gas use and number of customers, and after adjusting for year-to-year changes in temperatures, a steady decades-long decrease in household natural gas use emerges. Tighter building shells, higher appliance efficiency, and utility investments into efficiency have all contributed to cutting average household gas use by half since 1970, which in turn mitigates customer exposure when weather or price dynamics conspire to push customer bills up.

Residential use

What are some of the market fundamentals that underpin AGA’s Outlook?

First is supply. United States natural gas production is on track for another record year in 2015. Daily dry gas volumes in the lower-48 have averaged 71.6 billion cubic feet (Bcf) per day this year, which is a 5 percent increase from 2014, which itself was a record year.

production

Demand hasn’t let up either and is poised to set another record as well. Lower-48 natural gas consumption has averaged 76.3 Bcf per day year to date in 2015, an increase of nearly 4 percent on the backs of stronger natural gas power generation and exports to Mexico. Note that each year from 2010 through 2014 were all record years for demand. We might be adding 2015 to the list soon.

Natural gas in underground storage is in as strong a position as it’s ever been. At more than 3.5 Tcf of working gas in storage currently, there are typically about six weeks remaining during the injection season; that is, when net volumes into storage are positive. If volumes directed into storage remain at a rate consistent with the past five-year average—recognizing that this year’s injections into storage have actually exceeded the average rate—then winter inventories could surpass 4 Tcf for the first time ever.

The resulting balance between supply, demand, and storage has been a relatively low and stable natural gas price. The last time natural gas at Henry Hub was priced above three dollars was May 20, 2015, and most of the year has been in the $2.00-2.75 range. This speaks to the robustness of the supply and infrastructure in place despite record levels of demand so far in 2015 as well as the strength of production volumes.

price

Headed into the winter, supplies are robust and prices are moderate even with record levels of demand. Given these market fundamentals, consumer bills are expected to moderate or even decline this winter. Like I said: good news for households and businesses across the country.

Natural gas continues to be the lowest-cost energy option for home heating. Affordable customer bills is just one reason natural gas provides homeowners with value. As companies and the country continues to modernize the natural gas infrastructure base and connect homes and businesses to this system, new opportunities arise to lower consumer bills, improve energy efficiency, and achieve low-cost emissions reductions by leveraging this existing infrastructure and the nation’s abundant natural gas resources.

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Lisa O'Leary Advocates Urge Congress to Increase LIHEAP Funding

Nearly 200 advocates from across the United States converged on Capitol Hill last week to support responsible funding for the Low Income Home Energy Assistance Program (LIHEAP). The National Energy and Utility Affordability Coalition (NEUAC) sponsored LIHEAP Action Day 2015 along with member companies of the American Gas Association (AGA) and the Edison Electric Institute. The annual day-long event is aimed at building awareness for LIHEAP, a federal block grant program providing financial assistance to low and fixed-income individuals for fuel and utility bills, as well as low-cost weatherization and energy-related home repairs.

Representatives from Entergy and Atmos Energy met with Sen. Roger Wicker’s (R-MS) staff to discuss LIHEAP funding. Photo Credit: Entergy

Representatives from Entergy and Atmos Energy met with Sen. Roger Wicker’s (R-MS) staff to discuss LIHEAP funding. Photo Credit: Entergy

According to NEAUC, nearly 300 meetings took place between LIHEAP advocates and members of Congress and their staff, to discuss the need for at least $4.7 billion in LIHEAP funding for FY2016. Advocates in D.C. and throughout the country also took to social media to share important messages about LIHEAP by using #LIHEAPAction.

After many years of underfunding LIHEAP, Congress funded the program at $5.1 billion in FY2009 and FY2010. Since then, funding has declined by almost $1.7 billion and recipients have seen their assistance grants reduced by nearly $95, impacting the program’s effectiveness.  The average grant was estimated to cover less than half of the average home heating costs for a household this winter, meaning that many low-income families and seniors had fewer resources available to meet other basic needs.

This winter was especially hard-hitting in the northeast and southeast with record-breaking snowfall and cold temperatures, serving as a stark reminder of why the LIHEAP program is so critical. Here are just a few other reasons:

  • More than 35 million U.S. households meet LIHEAP’s federal eligibility criteria, yet only 6.8 million households were helped in 2014.
  • States and their charitable partners can serve households earning up to 150 percent of Federal poverty guidelines or 60 percent of median income. For a three-person family in the U.S., that’s less than $29,685, yet most LIHEAP households earn less than that amount.
  • Even with LIHEAP funding at $5.1 billion, the amount was only enough to assist 1 in 5 eligible Americans.
Rep. Peter Welch was presented with this year’s NEUAC Extra Mile award. Photo Credit: http://welch.house.gov/

Rep. Peter Welch was presented with this year’s NEUAC Extra Mile award. Photo Credit: http://welch.house.gov/

LIHEAP Action Day concluded with a Congressional reception and the presentation of the NEUAC Extra Mile award given to Rep. Peter Welch (D-VT), recognizing him for his longtime support of the program. In a letter to the House Appropriations Committee penned by Rep. Welch and Rep. Peter King (R-NY), more than 145 lawmakers stressed the critical importance of full funding of LIHEAP.

AGA had to opportunity to interview several advocates in attendance of the LIEAHP Action Day Breakfast. Stay tuned for links to those video interviews next week.

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Richard Meyer Natural Gas Market Indicators: Feb. 26, 2015

The one-two-three combination punches of cold weather to the eastern half of the United States have not been enough to pull natural gas commodity prices above $3 per MMBtu. Amid low prices the U.S. is on track to break the all-time record for February natural gas demand, suprassing the record previously set in 2014.

As demand surges, strong dry gas production continues apace as well. Flowing more than 11 percent higher than February 2014, production volumes have helped move storage volumes into a surplus relative to last year. How long this price environment will last remains to be seen. Supplies are now in a stronger place than last year or any time in recent history – which, of course, has contributed to the lower natural gas price environment.

Volumes to power generation and industrial demand are both running above last year, as have volumes to residential and commercial customers. The question remains how much more demand can the market absorb. If production continues to outpace demand growth, how long will the market continue to grow production at low prices? This year is shaping up to be another interesting one indeed.

Visit this link to download the full Natural Gas Market Indicators report. Topics covered in this week’s report include: Reported Prices, Weather, Working Gas in Underground Storage, Natural Gas Production, Shale Gas, Rig Counts, Pipeline Imports and Exports, and LNG Markets.

Please direct questions and comments to Chris McGill at cmcgill@aga.org or Richard Meyer at rmeyer@aga.org.

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Chris McGill Natural Gas Market Indicators: Feb. 13, 2015

The push toward natural gas power generation continues. New data from FERC shows natural gas comprised nearly half the new installed electric capacity additions in 2014 – wind plus solar accounted for the other half.

For the first six weeks of 2015, natural gas volumes serving power generation are up approximately 0.8 Bcf per day compared to this time last year, remembering that January 2014 was an all-time record winter month for gas to power gen. For the nation as a whole, heating degree days have been nearly five percent fewer than normal (warmer than normal) and thus heating load is down from the previous year by about 7.2 Bcf per day.

Overall U.S. demand is down about 6.7 Bcf per day. That means it is possible that storage inventories will be higher than last year as net injections begin in the spring, leaving more natural gas available to meet summer cooling loads. This comes when natural gas prices are low compared to recent history and generators turn to gas for its pricing and environmental attributes. One thing builds on another as the market progresses in 2015.

Visit this link to download the full Natural Gas Market Indicators report. Topics covered in this week’s report include: Reported Prices, Weather, Working Gas in Underground Storage, Natural Gas Production, Shale Gas, Rig Counts, Pipeline Imports and Exports, and LNG Markets.

Please direct questions and comments to Chris McGill at cmcgill@aga.org or Richard Meyer at rmeyer@aga.org.

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