NJ Spotlight

Winter Looks Good for Natural Gas Customers

Vast reservoirs of natural gas newly discovered in Marcellus Shale help drive prices down

NJ Spotlight — Friday, September 17, 2010

By Tom Johnson

For the second consecutive winter, customers who heat their homes with natural gas will pay smaller bills.

Unless a hurricane in the Gulf of Mexico disrupts supplies, customers of three of the four gas utilities in New Jersey are expected to pay less this winter than they did last year, thanks to lower demand due to a still reeling economy and abundant new natural gas supplies found in Marcellus Shale in New York, Pennsylvania, West Virginia and Ohio.

In approving winter gas rates for Public Service Electric & Gas, New Jersey Natural Gas and South Jersey Gas, the state Board of Public Utilities said residential ratepayers could see bills drop from as much as $94 for the Newark utility, the state's largest with 1.7 million customers, to $31 for New Jersey Gas homeowners. South Jersey customers will see bills drop by a bit under $50 a year. Elizabethtown Gas has not yet had its rates set, but states officials do not expect to see an increase.

Doubling Natural Gas Supplies

The big factor in the drop in rates is the discovery of massive amounts of natural gas supplies in the Marcellus Shale, which have effectively doubled the nation's natural gas supplies, according to a study by the Massachusetts Institute of Technology.

"It is beginning to have an effect," Jerome May, director of BPU's Division of Energy told commissioners during a meeting yesterday. "For the most part, the added capacity is acting as an inhibitor."

The shale gas reserves found in neighboring states are supplemented by similar reserves found in more than half of the states across the country, including near major metropolitan areas, such as Chicago, Denver and Dallas. The discovery has helped stabilize natural gas prices, and, even lower the cost.

Neil Gamson, an analyst at the Energy Information Administration, an arm of the U.S. Department of Energy, noted prices have stabilized even though this past summer with its record temperatures drove up demand for natural gas, since many electric generating stations rely on the fuel to keep air conditioners humming.

"The supply is adequate," said Gamson, citing the discovery of shale gas reserves as a major factor. "Ten years ago, it wasn't even on our radar screen. We thought LNG (Liquified Natural Gas) imports would have to make up the difference, but it doesn't look like that will be the case for a while."

Storm Warnings

The shale reserves have helped stabilize natural gas prices, which have been very volatile in recent years, partly because of disruptions in drilling and production due to hurricanes. For instance, in the second quarter of 2008, the price of natural gas per thousand cubic feet rose to $11.72, according to EIA data. For the second quarter of 2011, the agency is projecting natural gas prices of $4.74 per thousand cubic feet.

Those lower rates have been reflected in lower rates for gas customers. PSE&G has cut customers' bills 28 percent since January 2009, when wholesale natural gas prices began their latest decline. New Jersey's gas utilities do not make any profit on the gas they deliver to homes and businesses, earning income on the delivery of gas through their distribution systems.

Ev Liebman, program director for New Jersey Citizen Action, welcomed the lower rates, saying it is good news for consumers. "With reductions in natural gas prices, it makes sense," Liebman said. "It is what we expected and we hope that this trend continues."

The Energy Information Administration is expected to issue its winter forecast for home heating prices early next month, but despite lower prices for natural gas, it may take some time for that to be reflected nationwide in lower prices for households, according to Gamson.

Top Top | NJCA in the News | NJCA Homepage