Total electricity demand this winter is expected to be 2.8% higher than last year, federal energy forecasters predicted Friday. The Energy Information Agency (EIA) said the winter should be 11% colder than last, resulting in a 4.6% increase in electricity use by the residential sector and 3.9% increase by the commercial sector.
The impact of a colder-than-normal winter on fuel prices and consumer bills has become particularly difficult to forecast this year and "subject to much higher uncertainty than in past years," says EIA analysts Dave Costello and Neil Gamson.
EIA is predicting that natural gas used in power generation will yield its apparent average price advantage compared to residual fuel oil by the end of summer 2001 and that the heavy oil will be cheaper of the two fuels throughout 2001.
The agency is predicting total natural gas demand will average 71.2 bcf/day this winter, up 4.1 bcf/day over last winter. The projected increase will be driven largely by a return to normal winter weather, plus an increase of natural gas used by space-heating customers, the EIA said in its monthly forecast.
Domestic natural gas production is projected to increase to an average 51.8 bcf/day, during the heating season, up from the 50.7 bcf/day last winter. EIA is projecting withdrawals from storage this winter will be 9.2 bcf/day, slightly less than last year's average of 9.5 bcf/day. That would leave end-of-season stock of working gas at 857 bcf, compared to 1,150 last year, or the lowest level since the 750 bcf reached in March 1996.
Highest gas prices
This year, the average wellhead price for natural gas is expected to average almost $3.40/mcf, the highest annual price on record in nominal terms, the EIA said, and the highest annual average price since 1985 adjusted for inflation.
The rate of growth for gas demand is projected to slip to 2.7% next year, from about 4% this year, the result of high prices, EIA says. Electric generating plants that have been sold by utilities to unregulated generating companies is expected to help drive gas demand in the industrial sector up 9.3% next year.
Electric utility coal demand is expected to fall by 3.3% this year, primarily the result of the effect of the growth of nonutility electric generation, the agency says. It is predicting coal consumption by independent power producers is expected to more than double this year�increasing by 119%�from 45.9 million short tonnes to 100.5 million short tonnes.
The EIA is projecting total coal consumption by the electric power industry will rise 2.7% this year and 2.5% in 2001, while coal production is expected to remain virtually flat this year.