Nearly two-thirds of natural gas utilities responding to a survey by the American Gas Association (AGA) predict residential heating bills will be higher for the upcoming winter season, but those bills are still projected to be the fourth-lowest within the past decade.
Between 40 and 50 utilities, representing one-third of the natural gas market in the United States and serving 20 million residential customers, answered AGA’s survey last month. Sixty-two percent of respondents said they expect normalized residential heating bills to go up this winter compared to last, while the remaining 38% expect bills to be lower.
Respondents also said they expect residential heating bills will increase from last year by an average of 9.6% this winter. They also expect throughput to increase 6.6%.
The results were the opposite of a similar survey AGA conducted one year ago, when 82% of respondents predicted residential heating bills would be lower for the 2015-16 winter heating season. In a separate report at the time, AGA forecast residential bills would be 5-7% lower than the 2014-15 winter heating season (see Daily GPI, Oct. 9, 2015).
AGA senior analyst Brendan O'Brien told reporters on Wednesday that despite a predicted 9-11% increase in residential heating bills, "this is still probably going to be one of the lower gas bills that we've seen in the last 10 years. We think it will probably be the fourth-lowest." He added that this winter's heating bills are expected to be 28% lower than a 10-year high set during the 2008-09 winter heating season.
"In general, we're still seeing natural gas as being the cheapest low-cost option for homes to heat this winter," O'Brien said.
Citing data from the National Weather Service Climate Prediction Center and the National Oceanic and Atmospheric Administration, O'Brien said most of the United States is expected to see above average temperatures this coming winter.
During the first half of the winter, "everything is going to be warmer, especially in the Southwest," O'Brien said. "In the second half of the year, we're probably going to see something closer to what we've seen in the last couple of winters, where the South is warmer but there is a still a below-average colder region in the upper Midwest.
"What this means for natural gas heating is that although some of the parts of the country are going to be below average or colder, for the most part we're looking at an overall warmer winter nationally, compared to the 30-year average. Compared to last year though, it's actually going to be a little bit colder.
"So despite being warmer, we should expect people to need more gas because it's not quite what they expected from last winter. Natural gas prices are in fact going to be a little bit higher. But in contrast to years prior, when we had much colder winters and people might have needed even more gas, prices are significantly lower -- 45% compared to what we saw in 2014."
AGA’s Christopher McGill, vice president for energy analysis and standards, said the organization has observed a price trajectory moving slightly upward, as companies prepare for the 2016-17 winter heating season.
"Obviously last winter wasn't the only warm winter we've had; it was significant because it was sustained for so long," McGill said. "However, our members, in terms of their supply planning, are doing several things. They need to meet day-to-day service for customers, but they also have to meet that peak demand. That's something that they prepare for."
McGill said members have different methods for calculating peak demand.
"Virtually every company we have is probably asking themselves whether what they have used in the past is appropriate for today, with the changes we have seen in the winter climate," he said. "As a general rule, they have not gone away completely from using a 25- or 30-year back cast of expectations.
"But their systems are growing, too, so that influences how they look at their forward planning. The forecasting process is a little different for each company, and in some cases it's evolving."