Can the Spring 2016 Natural Gas Market Affect My Electricity Bill?

By Vernon Trollinger, April 8, 2016, Energy Efficiency, News

More states rely on natural gas powered generators than ever. In fact natural gas makes up about half of the generation capacity for Texas, while the Northeast United States is 95% powered by natural gas. Thus, understanding what’s happening in the natural gas industry can help you understand what to expect with electricity rates and how you can use that knowledge to help you save money on your electricity bill.

Demand? What Demand?

Can the Spring 2016 Natural Gas Market Affect My Electricity Bill?

When the winters are mild, these gas meters don’t see much activity.

Right now, there is a huge supply of natural gas in storage due mainly to the warmest winter on record. How warm was it? It was so warm that Alaska’s annual dogsled race, the Iditarod, had to import snow in February.

As of March 25, 2016 stored supplies of natural gas has exceeded the five-year maximum. That’s 2,468 billon cubic feet (bcf). Compare that to April 1, 2014 when there was only 826 bcf in storage after a bitterly cold winter. These excess reserves translated into lower average wholesale electricity prices during this past winter compared to recent years. The glut has begun slowing production, especially in the more expensive shale plays. For example, output from the gas-rich Marcellus shale has begun leveling off.

Weather Predictions

El Niño conditions will continue to keep temperatures throughout most of the country above average — though West Texas may be cooler than normal. However, the El Niño is expected to dwindle to “neutral” this spring. A La Niña has a 50% chance of emerging next year, which could bring:

  • Warmer, dryer winter to Texas and the Southeast United States;
  • Warmer, wetter winter conditions to the Northeast, but colder, snowier conditions to the upper Midwest United States; and
  • Increased potential for Atlantic hurricanes — which could disrupt natural gas production in the Gulf of Mexico.

In the short-term, summer temperatures are predicted to be above normal across many of the northern states for most of the summer. Texas has equal chances of above-normal, normal, or below-normal temperatures. However, come August there is an increasing chance for warmer conditions.

Spring Fever

Can the Spring 2016 Natural Gas Market Affect My Electricity Bill?

Here’s a picture of a gas turbine. It just looks cool.

The problem with all this supply (which came about from last year’s record production) is it keeps prices low and hits producers with lower profits. Commodity prices for oil and natural gas are so low that an estimated one-third of these producing companies will go bankrupt. In 2015, 67 oil and gas companies filed for bankruptcy protection.

Not surprisingly, oil and natural gas producers are feverishly furloughing workers and reducing the number of operating rigs so they can stay in business. During the end of March last year, natural gas rigs in operation in the US numbered 242. In the same period this year, the rig amount has been cut to just 92.

Increased demand would naturally improve things for natural gas producers. So, a hot summer with high energy demands for air conditioning would force generators that burn natural gas to produce the required electricity. And since more generators are fueled by natural gas than in the past, we’re talking about burning up hefty chunk of store gas. As gas prices rise, so will electricity rates — especially in late summer.

Given NOAA’s forecast for summer, that’s certainly looking like a possibility.

Your Electricity Bill

Energy prices have cycled into the annual spring trough as weather moderates into warmer temperatures and cuts heating demand for electricity and natural gas. With natural gas prices bumping along at near-historic lows, locking in a low fixed rate now could save money on your summer cooling bills and your winter heating as well. With electricity prices expected to increase by 2.4% in 2017 as temperatures head back towards “normal,” signing on for a longer-term plan could save you even more money over the long haul.

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About 

A native of Wyomissing Hills, PA, Vernon Trollinger studied writing and film at the University of Iowa, later earning his MA in writing there as well. Following a decade of digging in CRM archaeology, he now writes about green energy technology, home energy efficiency, DIY projects, the natural gas industry, and the electrical grid.

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