Investor-owned retail gas companies expect consumers to pay about 5% more for gas heating this winter, driven largely by forecasts of cooler winter weather when compared to the last two years of warm winters, the companies' trade group said in its Oct. 17 winter outlook.
Those same customers will not face interruptions in the supply of gas for heat or even power, said Chris McGill, the American Gas Association's vice president for energy analysis and standards, despite testimony by Energy Secretary Rick Perry before Congress on Oct. 12 that grid reliability seems to be threatened by natural gas pushing coal and nuclear plants to retirement. Perry wants the Federal Energy Regulatory Commission to design a rule to compensate baseload coal and nuclear plants for their availability.
Perry cited the polar vortex of 2014 spiking gas prices as evidence of natural gas' unreliability. A coalition of oil and gas producer groups and environmental activists has already filed comments disputing that conclusion.
According to McGill, the accelerated FERC rulemaking to buttress coal and nuclear has had little effect on gas consumption or downstream gas markets. "The use of natural gas in this country is a physical thing. It's supported by a market where, frankly, comments from Mr. Trump or Mr. Perry are not going to impact it immediately. The suggestion that Mr. Perry has made to FERC to capture those costs associated with coal — I'm not talking out of school here — this is part of his [Trump's] campaigning, part of his promise to do something to protect coal," McGill said.
Noting the Oct. 13 retirement announcement for two more coal plants in Texas, the writing is on the wall, McGill said. "Cleaner grid? That horse is out of the barn, right? We're looking at companies that have already been making decisions around renewables, lower cost of renewables, and facilitation by natural gas. CO2 emissions in 2016 are the lowest in 25 years, and gas is part of that story," McGill said.
"Resiliency is very important for natural gas," McGill said. "Natural gas has a history of demonstrating that resiliency, market resiliency as well as the physical capability to deliver."
In an AGA survey answered by 42 local gas distribution companies representing about 25% of the nation's gas supply, half the firms expected to charge customers more and the remainder expected winter gas bills to remain unchanged. Weather forecasts predicting a cooler winter than the previous one in the upper Midwest were balanced by forecasts for warmer-than-normal temperatures across the South and into New York and New England.
The National Weather Service is predicting that winter 2017-2018 will be 1% warmer than normal but 13% colder than 2016-2017. At the same time, the price for gas in 2017 at the benchmark Henry Hub is 21% higher than 2016's, at $3.07/MMBtu.
The AGA's forecast differs widely from the U.S. Energy Information Administration's winter outlook for 2017-2018. The EIA expects gas consumption to increase 9%, three times AGA's finding, with a 2.5% increase in the base costs of gas and a 12% increase in heating bills. McGill said the difference is because AGA confines its predictions to residential customers for the smaller sample size of AGA member companies.
McGill said demand for exports to Mexico and LNG are not driving any price increases. "That has not happened one iota," McGill said. "Having demand is what this marketplace is still looking for. What it's come in the form of in recent years is LNG exports and, of course, more natural gas to power generation."