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UGI Utilities Dropping Rates on Marcellus Production Spike

The low price of natural gas may be keeping producers up at night, but it's helping some Pennsylvania consumers sleep easier.

The flood of shale gas depressing prices in the region is cutting costs for UGI Utilities Inc., a gas and electricity supplier across eastern Pennsylvania. The company said residential heating bills will fall between 4.5% and 13.5% starting Wednesday.

"The increase of supplies of natural gas from Marcellus Shale has helped create continued downward price pressure on natural gas," Vicki O. Ebner, senior vice president for customer and government relations, said. "We are pleased to pass this cost savings on to our customers as we approach the winter heating season, especially in the midst of extreme price volatility for other energy sources."

That downward price pressure means UGI customers are paying between 23% and 29% less today than three years ago for gas, the company said. The range of price decreases comes from the fact that UGI operates in Pennsylvania through three subsidiaries.

Annual natural gas prices in Pennsylvania have declined over the past three years. Residential prices fell to $13.29/MMBtu in 2010, down from $15.14/MMBtu in 2009 and $16.66/MMBtu in 2008. Commercial prices saw similar declines over the three-year period ($10.81/MMBtu in 2010, $12.15/MMBtu in 2009 and $14.68/MMBtu in 2008). Industrial prices, which averaged $12.42/MMBtu in 2008, tumbled 22% to $9.67/MMBtu in 2009 before recovering to $10.45/MMBtu last year.

Although gas costs have been dropping in recent years, they haven't been dropping consistently. In June the rate UGI customers paid for gas jumped by 3.6-5.9%, an increase the company attributed to "building price pressure on overall energy costs."

UGI Utilities said consumers in its service area are converting to natural gas in record numbers this year.

Parent company UGI Corp. is heavily invested in the Marcellus (see Shale Daily, April 21; Daily GPI, Jan. 4; Aug. 16, 2010). In 2010 it announced plans to spend $300 million on projects to improve transportation access and increase storage in the region. Its subsidiary UGI Energy Services Inc. recently announced a $150 million project to add 30 miles to its Auburn Gathering System in northeastern Pennsylvania, connecting prolific production areas to the Transcontinental Gas Pipe Line (see Shale Daily, Oct. 24).

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