Category Archives: winter heating

Lori Traweek Winter Is Coming

giphyThose are the three simple words that capture why natural gas should be a significant part of our energy portfolio today and in the future. And it is not just because December 21 is the first official day of winter and there is nothing like natural gas to heat your home. In “Game of Thrones” there are several families vying to be king of all kingdoms. But what Jon Snow realizes is that instead of fighting each other, they need to be together fighting a common enemy, the White Walkers, who threaten all their existences.

And much like in the lands of the Westeros, there is a common misconception that the many sources of energy in the United States should be fighting for supremacy. That is unproductive and unrealistic. Rather, our focus should be on working together towards our mutual interest for a cleaner energy economy. Reliable, resilient, efficient, safe and affordable energy is core to Americans’ quality of life and we should all combine forces to work against anything that threatens that end. Winter is coming. And if we do this right, with the ability to make environmentally friendly choices that do not sacrifice reliability, resiliency, safety and affordability, it is the customer who should end up in the throne.

Natural gas is a foundation fuel and has been the key to unlocking the most substantial greenhouse gas emissions reductions in the nation’s history by reducing the use of coal for making electricity and facilitating growth in renewables. Electricity generators have chosen natural gas for its affordability and reliability, often replacing coal-fired power plants and emitting up to 56 percent less greenhouse gases than coal for the same amount of electricity. Between 2007 and 2015, the amount of electricity generated at coal-fired power plants declined more than 30 percent. Natural gas and renewables have filled that gap, with natural gas providing about two-thirds of the electricity to plug the hole left by coal; renewables made up the other third.

But the direct use of natural gas for heating, cooking and clothes drying is even cleaner. From the place where it is extracted from the ground, to appliances in your home, natural gas achieves 92 percent energy efficiency. When you factor in energy use and emissions along the full fuel cycle, households with natural gas versus all-electric appliances produce 37 percent lower greenhouse gas emissions.

More homes and businesses use natural gas today than ever before: 177 million Americans, due in large part to its affordable and stable prices. Those that use natural gas for heating, cooking and clothes drying save an average of $874 per year compared to homes using electricity for those applications. Low domestic natural gas prices have led to savings of almost $50 billion for customers who have used natural gas for heating, cooking and clothes drying over the past four years.

Not to mention, the natural gas delivery system is remarkably resilient and natural gas utilities plan throughout the year to prepared for the coldest days. Even during the Polar Vortex natural gas customers remained warm and toasty.

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Chris McGill Natural Gas Market Indicators: October 14, 2016

Oil-directed drilling is up 35 percent as measured by Baker-Hughes rig activity since late May 2016 and gas drilling is up 16 percent from the end of August. Much of the drilling increase is attributed to increased oil and natural gas wellhead prices – oil now over $50 per barrel and natural gas above $3 per MMBtu. These energy prices remain great values for consumers while injecting just a little more money into the upstream sector, which is not a bad thing.

We will continue to watch storage inventories and heating degree day data to see what they will say about the robustness of natural gas demand to begin the winter heating season. Remember, the winter heating season of November 2015-March 2016 was the winter that wasn’t, as national heating degree days came in 17 percent fewer (warmer) than normal. A return to any semblance of normal may mean residential and small commercial users consume more natural gas during the heating season and thus overall bills may increase.

AGA will host a media briefing on Wednesday, October 19, to present expectations for peak month natural gas supply and demand as we move into the 2016-17 winter heating season. Experts from AGA will discuss the winter outlook for the natural gas market including market stability, natural gas bills for consumers, U.S. natural gas imports and exports, the global LNG market as well as energy efficiency and the benefits of the direct use of natural gas. An open question and answer session will follow the presentation. If you are a member of the media and would like to RSVP, please email jbavaro@aga.org.

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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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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