US gas group expects higher winter heating bills

OREANDA-NEWS. October 20, 2016. Residential and commercial customers could see their natural gas bills increase by 9-11pc this winter as expected colder weather drives demand, the American Gas Association (AGA) said today.

Winter heating bills should be lower than an average bill over the past decade, the natural gas utility trade group said. But they are still likely to be higher than last winter, when weather was "extraordinarily warm" and natural gas prices were slightly lower, AGA energy analysis vice president Chris McGill said.

This heating season is forecast to be about 12pc cooler than last year and to have 3,408 heating degree days, according to the US National Weather Service. Those relatively cooler conditions would still be about 8pc warmer than a normal heating season, which has 3,718 heating degree days.

Natural gas prices will likely be higher this winter. The US Energy Information Administration expects spot prices at the Henry Hub to average \\$3.15/mmBtu this heating season, which would be 53pc higher than last winter. US gas production has averaged 70.1 Bcf/d in October, 3.7pc below production levels in October 2015. McGill said this was part of an overall tightening of US gas markets and moderately higher prices.

Government forecasters and industry experts are not expecting major increase in gas prices, which they expect will be moderated by an uptick in domestic drilling activity if gas and crude prices rise. US oil and gas producers have achieved significant reductions in their drilling costs that have made it possible for wells to be profitable at far lower prices.

"If prices find themselves inching up, my view is we will have a supply response in the market, and as we know, supply responds quickly," McGill said.

The US northeast has had repeated incidents of natural gas price spikes in recent winters because of limited pipeline capacity serving the region and increasing demand from gas-fired generators. Those generators have not purchased firm pipeline capacity, meaning they often have to buy gas on the volatile spot market or switch their fuel source to on-site supplies of fuel oil.