Government says winter electric, gas bills to fall

Turning expectations on their head, net injections of natural gas into storage continued in November with one-third of the heating season over, the federal government said. As a result, the agency is projecting consumer prices will decline sharply this year compared to last.

By the OGJ Online Staff

HOUSTON, Dec. 7 -- Turning expectations on their head, net injections of natural gas into storage continued in November with one-third of the heating season over, the federal government said.

More gas was going into storage than coming out in the last week of November, the Energy Information Administration said, normally a time of year when withdrawals exceed injections. As a result, the agency is projecting consumer prices will decline sharply this year compared to last.

For the 6-months ending Mar. 31, 2002, EIA predicted a 35% decline in bills for gas-heated homes; 29% for oil and propane-heated homes; and 12% for homes heated by electricity. With usage down and storage up, the agency has cut it price outlook.

It now believes wellhead prices will stay below $2.40/Mcf through the winter. Next year, EIA believes the average annual price will be just under $2/Mcf, barring unusual weather or major supply disruptions. These prices reflect a big jump in storage. EIA estimated gas in storage rose 29% in November, compared to the same period a year ago, thanks to warm weather and weak industrial demand.

Industrial gas demand this year is expected to be nearly 20% below last year's level. EIA projected total gas demand will be down 4.4% from 2000.

The prices of delivered gas declined 18% below heavy fuel oil prices in September, EIA said. The agency said it believes gas has most likely already returned to its historical price advantage, and by next spring, this advantage is expected to widen as natural gas prices are expected to once more decline.

Demand for power is expected to be flat this year compared to last, but to revive slightly to about 1.5% in 2002. Last year electricity demand rose 2.8% over 1999's level. EIA said electricity demand is expected to be slower than it was in 2000 mainly because the economy is growing much more slowly than it was last year.

After declining this year, EIA economists expect industrial electricity demand to stabilize in 2002, along with the economy. In 2001, growth in residential and commercial demand for electricity is expected to be 1.8% and 3.5% respectively. The agency is predicting a slowdown in commercial sector demand next year because of the "very slow" expected growth in commercial employment and output.

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