While domestic natural gas production activity and storage remain at strong levels despite hurricane-induced disruptions and the global financial meltdown, gas consumers could wind up paying 10-30% more in home heating costs this winter, according to the American Gas Association (AGA).
“While natural gas prices have declined substantially since reaching their all-time highs in early July, they are still higher than they were at this time last year,” said Chris McGill, AGA’s managing director for policy analysis, during a press briefing Monday at the National Press Club in Washington, DC.
“Because utilities purchase natural gas from suppliers throughout the year and store it in underground facilities for winter delivery, much of the natural gas utilities will deliver to households this year [winter] was purchased when prices were at or near these historic highs,” he said.
Natural gas futures reached a peak of $13.694/Mcf (for August delivery) on July 2, almost double where gas futures closed on Friday — $7.358/Mcf for November delivery. Some of this high-priced gas was injected into storage by utilities in anticipation of the high demand typically seen during the winter heating season, which begins on Nov. 1 and runs through the end of March.
The Natural Gas Supply Association (NGSA), which released its winter outlook last Thursday, also conceded that consumers’ bills could be somewhat higher this winter (see Daily GPI, Oct. 3). Although it sees little pressure on wholesale gas prices going into the winter heating season, the producer group said this may not have an “overnight impact” on consumer bills.
Consumers could face higher prices this winter because the gas they will use was injected into storage during the summer when it was “relatively more expensive,” said NGSA Chairman Patrick J. Kuntz.
Faced with the prospect of higher heating costs, AGA noted that most of the 202 local gas utilities across the nation offer billing plans to help spread the winter heating bills over many winter months. And for the particularly vulnerable customers, Congress last week approved record annual funding for the Low Income Home Energy Assistance Program (LIHEAP) to help needy families pay their heating bills.
“The record $5.1 billion in LIHEAP funding will provide much needed help to low-income families by allowing states to increase the number of families served from 5.8 million to 7.8 million,” said Mark Wolfe, executive director of the National Energy Assistance Directors Association, at the AGA press briefing. “It will also allow states to pay for an average 50% of the cost of home heating this winter, up from about 36% last year.”
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