BY DAVID FALCHEK
Those who heat their homes with natural gas will get a big break this heating season as rates plunge to their lowest level in more than a decade thanks largely to Marcellus Shale development.
UGI Penn Natural Gas, the dominant natural gas utility in the region, announced the average natural gas bill will be 9 percent lower than last year. The average residential heating customer’s bill will fall from $108.58 to $98.83 per month, according to rates filed with the state Public Utility Commission.
The price of natural gas has fallen to its lowest level in more than a decade.
UGI’s purchased gas cost rate – the price it pays for gas and directly passes through to customers – has fallen dramatically.
From Sept. 1 through Dec. 1, the cost for 1,000 cubic feet of natural gas, or Mcf, fell from $6.76 to $5.66, a 16 percent drop and the lowest since the fall of 2000. The gas cost accounts for the majority of the typical natural gas bill. The balance of the bill is customer charges and distribution rates.
The extraction of natural gas from shale formations throughout the U.S. and in Pennsylvania has made it an abundant, readily available resource.
The state’s Marcellus Shale production, still considered by many to be in its infancy, can in 13 days meet UGI utility customers’ needs for an entire year, said UGI spokesman Joe Swope. While UGI buys a substantial amount of gas directly from the gas drillers active in Pennsylvania, the shale gas has pulled down wholesale natural gas prices nationwide, Mr. Swope said.
The warm fall has helped, too, pushing prices even lower than many anticipated.
“A few months ago I would have said prices couldn’t go much lower, but here we are with still lower prices,” said Hamza Khan, an energy analyst with the Schork Group in Montgomery County.
Natural gas storage has been bursting at the seams and temperatures in the Midwest and Northeast have been as much as 20 percent above average, Mr. Khan said. With thermostats still turned low through the fall, natural gas inventories haven’t been drawing down like they typical would.
The other function of the development of shale gas is stability. When the Northeast was dependent upon natural gas from the Gulf of Mexico, for example, hurricanes Rita and Katrina and the disruption cause in the natural gas industry drove UGI’s gas rate to $11.18 per Mcf, more than twice the current rate.
Meanwhile, UGI has been scrambling to meet requests for conversions of homes currently on other forms of heating to natural gas. Whether UGI can accommodate those requests depends on the availability of existing gas mains in the area
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