The natural gas market last year continued to make adjustments to accommodate growing supplies from shale basins. Pipeline flows shifted, and in some cases reversed, and power generators increasingly turned to natural gas for new capacity. Meanwhile, a wicked winter strained some infrastructure and sent prices in some markets soaring.

During 2013, most natural gas hubs across the U.S. traded 30-40% higher than the historically low prices of 2012, according to a market assessment prepared by FERC staff and presented to the Commission on Thursday. Regionally, the highest prices occurred in the Northeast, which occasionally spiked into the $20.00-30.00/MMBtu range during high demand periods due to pipeline constraints and low liquefied natural gas imports.

Prices over the rest of the country generally traded within a narrow range, indicating a well-supplied market with few pipeline constraints, staff of the Federal Energy Regulatory Commission said. The lowest prices in North America occurred at the AECO hub, in Alberta, which occasionally traded below $2.00/MMBtu, as Canadian gas producers lost market share to growing U.S. production. Sub-$2.00 prices also occurred in Appalachia as takeaway infrastructure struggled to keep pace with growing Marcellus gas production.

Shifts in pipeline flows across the United States emerged as natural gas production from shale displaced conventional sources. Marcellus gas in the Northeast is cheaper and more convenient for Northeast demand centers. A 3.5 Bcf/d increase in Marcellus gas production displaced natural gas supplies from the Southeast, the Midcontinent and Canada, FERC staff said. Supplies from those regions fell from about 12 Bcf/d in 2008 to less than 6 Bcf/d in 2013. In some instances, pipelines reversed physical flows to provide Marcellus gas to the Southeast, Canada and the upper Midwest.

A 1.2 Bcf/d increase in Eagle Ford Shale production on the Gulf Coast led to an increase in pipeline flows to the Midcontinent, which primarily displaced Midcontinent production. This led to sub-$2.00 Midcontinent prices during the summer. Growing demand from gas-fired generation in Mexico has also absorbed some Eagle Ford gas production, with year-over-year exports up 8%.

Power generation resource additions were made not to accommodate an increase in demand for electricity but due to changing fuel economics and federal and state policies, the FERC staff analysis said. Markets across the country are adjusting to the changing resource mix, addressing both a growing reliance on natural gas for electric generation and the integration of renewable electricity sources. Total net generating capacity increased by about 2 gigawatts (GW) in 2013.

Natural gas-fired capacity posted the largest net increase, almost 5 GW, and it continues to constitute the largest share of electric capacity. “Greater use of natural gas for generation increased the sensitivity of the electric sector to natural gas prices and supply issues,” FERC said. “For example, New England has experienced price volatility, transportation disruptions, and greater use of oil-fired generation during extreme weather events, while California has seen strained natural gas supplies during region-wide cold spells.”

Retirements of aging nuclear and coal plants reached almost 3 GW and 4 GW, respectively. Some regional transmission organizations have looked to interim measures to keep generators running until transmission or generation alternatives can be developed.

Utility-scale solar resource additions were up more than 3 GW and set a new record. Wind generation additions, while down from 2012, added more than 1 GW of nameplate capacity.

The winter of 2014 has shown how extreme weather can still stress natural gas and electricity markets. In January, U.S gas demand set a new daily record of 137 Bcf/d. Well freeze-offs, record storage withdrawals, and high pipeline utilization led spot natural gas prices at the Henry Hub to jump to a January high of $5.70/MMBtu. In the mid-Atlantic and Northeast, spot natural gas prices soared to more than $120.00/MMBtu at key trading points.