Natural Gas Utilities Provide 2007-08 Winter Outlook for Natural Gas Customers

Washington, D.C. –   Robust production activity, abundant natural gas storage, the expected expansion of liquefied natural gas (LNG) terminals and construction of new pipelines are likely to  benefit natural gas customers over the 2007-08 winter, according to key executives from the American Gas Association (AGA), which represents the nation’s natural gas utilities.   At its Winter Heating Outlook press briefing here today, AGA representatives said this winter’s supply of natural gas is abundant, but reminded the audience that utilities acquired a portion of the natural gas they will pipe to homes and businesses this winter earlier in the year when wholesale prices were higher than they are at present.  AGA representatives also warned that weather conditions ultimately determine the size of home energy bills, because cold weather causes consumers to use more natural gas. 

“This year, it’s a return to ‘business as usual’ for natural gas utilities and their customers,” said Chris McGill, managing director, policy analysis for AGA.  “The business of a natural gas utility is to provide reliable supplies at an affordable price to its customers throughout the winter and all indications are that utilities are going to conduct that business very well this year.”  McGill said natural gas customers will benefit from incremental increases in natural gas supply made possible through the completed expansion of two LNG terminals, the construction of the Rockies Express Pipeline  and the Independence Hub. 

According to AGA, natural gas utilities purchase natural gas from a variety of competing suppliers throughout the year.  Some of this natural gas is placed in underground storage facilities for the utility to draw from during the winter and some of it is scheduled for delivery to the utility’s pipeline system during the winter months. 

McGill said that demand for natural gas for electricity generation continues to grow.  “There are peaks in demand for natural gas during the hottest months, when it’s needed to generate electricity,” McGill said,” However there are also multiple mini-peaks in consumption of natural gas to generate electricity throughout the winter to take into account.

“Are we challenged for this winter?  Not from the stand point of reliably supplying customer demand,” McGill said.  “But we need to keep in mind that costs are higher today than when compared to history and that adequate supply for winters to come remains an issue.” 

Paul Wilkinson, vice president, policy analysis, AGA agreed with McGill, “Natural gas is a premiere fuel from an environmental perspective,” said Wilkinson.  “Ninety percent of all new electricity generation plants built since the 1990s have been natural-gas fired,” he said.  “Climate change mitigation policies are likely to lead to an even greater reliance on natural gas; however the potential for natural gas to contribute to environmental improvements cannot be realized unless access to the resource is increased.” 

Natural gas utilities have used storage, the competitive marketplace and financial tools to protect their customers from price increases and volatility.  According to U.S. Energy Information Administration statistics, the price of all major home energies has increased since 2000.  By law, natural gas utilities may not mark up the price of natural gas.  Instead, utilities charge natural gas customers the same wholesale price they paid to acquire the fuel.  Like FedEx or UPS, utilities earn any profits from a separate delivery charge that is not linked to the price of the product they deliver.
 
“By continuing to use energy wisely, customers can gain greater control and predictability over their home energy bills,” said Wilkinson.  In addition to using programmable thermostats, he advised customers to take advantage of  tax credits for high efficiency furnaces and boilers, energy-saving windows and home insulation and to look into levelized billing programs offered by natural gas utilities. 
 
 “Households are using about 33 percent less natural gas than they did in 1980,” Wilkinson said.   “But efficiency alone is not the answer:  low-income households need help.” 

Mark Wolfe, executive director of the National Energy Assistance Directors Association, which is the primary educational and policy organization for the state directors of the Low Income Home Energy Assistance Program (LIHEAP), agreed with Wilkinson and called on Congress to increase funding for LIHEAP this winter.