As the country continues to emerge from the economic downturn of the pandemic, companies are using more natural gas for their operations and producers are scrambling to meet that demand. It’s a formula for higher prices, and that’s what residential National Grid customers will see this heating season.
“Because we use more energy now, we are using more natural gas for a range of uses across the United States,” said Richard Meyer, vice president of energy markets, analysis and standards at the American Gas Association. AGA represents more than 200 local energy companies that deliver natural gas across the United States.
He spoke Thursday on a conference call hosted by National Grid to discuss the winter heating forecast.
The supply of natural gas has also increased, Meyer said.
“However, it has not grown as quickly as the demand for natural gas,” he said. “As a result, across the country we are seeing a slightly tighter market which as supply increases but does not quite keep pace in the short term with increasing demand for natural gas. “
Market conditions will affect National Grid customers during its five-month heating season, which runs from approximately November 1 to March 31. Customers’ bills for natural gas have two components: the supply of energy and the delivery of energy.
“The part of the supply, which includes the actual cost of natural gas, is defined in the market and passed directly to customers without mark-up,” said Patrick Stella, communications manager for National Grid.
In late September, National Grid filed a request for a potential rate increase in the delivery aspect with the New York Civil Service Commission for review. The delivery aspect also includes the cost of maintaining and repairing the delivery system and responding to emergencies related to the system.
National Grid’s supply forecasts are updated at the end of each month. Based on forecast market conditions at the end of September for the five-month heating season, residential utility customers who, on average, operate 713 thermal baths from November to March, are expected to pay $ 651. That’s about $ 155 more than the previous heating season for the same amount of energy.
National Grid states that the average figure of 713 relates to the “upstate” New York region and does not calculate average seasonal temperatures up to individual regions such as upstate New York. New York.
“Therm” is the unit of measurement for natural gas over time. One therm is equal to 100,000 British thermal units, BTUs. To put this in perspective, the US Energy Information Administration says 100,000 BTUs is the amount of heat required to raise the temperature of 1 pound of water by 1 degree Fahrenheit.
“This forecast is based on information available in late September and assumes normal winter weather,” said Melanie Littlejohn, vice president of customer and community engagement for National Grid. “The cost and use are influenced by weather conditions. We want to remind everyone that today’s forecast numbers are approximate and based on the current snapshot. “
“Still relatively weak”
For pricing, the gas market is keeping a close eye on the “Henry Hub” – a distribution center on the gas pipeline system in Erath, Louisiana. The Henry Hub’s “spot price” fell from $ 5.63 per million British thermal unit, MMBtu, on September 29. at $ 5.95 on Wednesdays.
“These prices are still relatively low and stable compared to history,” Meyer said. “At this time of year we have already seen prices of up to $ 14 (per) MMBtus. So, prices in the $ 5 and $ 6 range, although higher compared to recent history, remain relatively low and stable compared to a longer view.
The “potential future supply” of natural gas, Meyer said, is at an all time high.
“When we look at these recoverable natural gas resources, the United States has an abundance of them,” Meyer said. “The question is: what can be produced economically and then moved? “
For example, there has to be an infrastructure in place to get that natural gas to where it’s needed.
“It will play out differently in different parts of the country,” Meyer said.
Over the past decade, he said, natural gas producers have generally resumed drilling operations quickly as natural gas prices have risen.
“However, over the past year, as natural gas prices have recovered, the resumption of drilling activity has been somewhat subdued,” said Meyer. “Production has increased this year, but it hasn’t really grown as much as expectations given the history we’ve seen.”
There are reasons for this decline in production, Meyer said.
“These companies that explore and produce natural gas have announced greater discipline in terms of capital spending with the intention of increasing production,” he said. “This discipline is based on their experience of last year and the last few years with low natural gas prices. Coming out of those lows, we haven’t really seen growth as fast as we would have expected. “
But Meyer is encouraged by the growth in production in the southern United States as well as the increased infrastructure there.
Natural gas is stored in large quantities in underground facilities and in smaller volumes in tanks above or below ground.
“These working gas levels are below the five-year average, but they continue to rise,” Meyer said. “Charging continues at a steady pace. In particular, we are seeing in the Midwest region and the Eastern region, key areas where underground storage primarily serves utilities and their customers during the winter months, we are seeing heavy reloads in those areas. In the east, it’s a little below the five-year average and last year’s level, but it’s still a strong recharge.
Ms Littlejohn said that to mitigate market volatility on customer bills, National Grid is taking an active role in managing gas supply through such things as storage, future price hedges and price foreclosure. .
“Our customers pay exactly what we pay for energy and not a dime more,” she said. “We recognize that higher supply prices are certainly not easy for our customers, and in particular for our customers who continue to struggle with the economic hardships caused by the pandemic. “
Ms Littejohn urged customers who may have difficulty paying their bills to take advantage of the National Grid programs described on her website. This assistance can range from grant programs to National Grid’s energy affordability program.
There is also the federal home energy assistance program for low-income people, LIHEAP.
“National Grid customers who are eligible for HEAP are also eligible for additional discounts through our Energy Accessibility Program as well as many other payment and billing options,” Ms. Littlejohn said.
National Grid customers can call 1-800-642-4272 and have a consumer advocate contact them.
Proposal to the CFP
If approved by the Civil Service Commission, National Grid’s three-year proposal for its gas and electricity tariff plans would take effect on January 1, 2022. Under the terms of the agreement, average residential customers of Electricity users who use 600 kilowatt hours per month would see a monthly bill increase of $ 1.88 the first year, $ 1.88 the second year and $ 2.23 the third year. Average residential gas bills for customers using 82 thermal baths per month would increase by $ 1.51 per month in the first year, $ 2.37 in the second year, and $ 2.56 in the third year.
“We’ve worked hard to strike a balance between prioritizing energy affordability for customers and ensuring resilience – especially in light of the record number of damaging storms we’ve seen across the north. New York State – while postponing other programs and initiatives that would increase our customers’ bills, ”Rudy Wynter, president of National Grid in New York City, said in a press release.
He noted that, as part of the deal, National Grid is committed to providing a portfolio of programs focused on energy efficiency, heating alternatives and new technologies to help customers manage their energy consumption. energy on the 25,000 square miles of the company’s service in upstate New York. Region.
The New York Civil Service Commission is expected to vote on the proposal by the end of this year. If the rate case is approved by the PSC, customers will notice these impacts in their first invoices for calendar year 2022.