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Archive for Wednesday, November 14, 2012

Natural gas prices expected to rise for first time in three years, local gas supplier predicts

November 14, 2012

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Winter in Lawrence this year may not be such a day at the beach.

Leaders with Black Hills Energy, the city’s largest provider of natural gas, are predicting natural gas prices will rise for the first time in three years, although prices will still be near historic lows.

But if Mother Nature produces a winter more in line with Kansas averages, residents may notice an increase in their heating bills this season.

“If you remember, we basically didn’t have a winter last year,” said Larissa Long, a spokeswoman with Black Hills.

Even if the winter is mild like it was a year ago, residents likely will notice an increase. Black Hills officials are predicting that gas prices will increase to $3.55 per million BTU, up from $2.94 a year ago.

That’s a 20 percent increase in the price of natural gas, but because natural gas represents only a portion of a customer’s monthly bill, overall increases are expected to be less.

Black Hills estimates that 65 percent of a customer’s monthly bill is related to the price of natural gas. The remaining 35 percent of the bill is tied to distribution and operational costs, which are regulated by the Kansas Corporation Commission. The rates that Black Hills charges for operation and distribution are not going up this year, Long said.

So, on a $100 monthly bill, $65 of the bill would be related to the cost of natural gas. A 20 percent increase would amount to an extra $13 per month.

The trickier part to predict is whether colder temperatures will require customers to use more natural gas.

Jared Leighton, a meteorologist with the National Weather Service in Topeka, said an uncertain El Niño pattern has made it difficult to make a prediction for the winter season in Kansas.

“But it is very, very unlikely we’ll see something like last year,” Leighton said. “That set all types of records for the warmest and driest winter.”

But Leighton said most long-range forecasts are still predicting a winter that is milder than the historic average.

Long said natural gas prices are on the rise because drilling activity has slowed as the price of natural gas has fallen dramatically. From 2007 to the beginning of 2012, natural gas prices have dropped from $6.78 per million BTU to $2.94.

“I think most of the drilling rigs right now are going after oil,” Long said.

But Long said the long-term outlook for natural gas remains more positive than it has been for years. The technological breakthroughs that have allowed producers to effectively extract gas from shale formations have boosted the outlook of the industry. U.S. natural gas supplies now are estimated to be adequate for the next 100 years, when previously there were concerns the country would have to start importing large amounts of natural gas.

Black Hills Energy provides natural gas service for most parts of the Lawrence area, although growth on the eastern and western edges of the city is now moving into Atmos Energy’s service territory.

Black Hills also has its Kansas headquarters in Lawrence. It recently moved its headquarters from Ninth and New Hampshire streets to the former First Management headquarters building at 601 N. Iowa St.

Comments

catfishturkeyhunter 1 year, 5 months ago

I havent turned the heater on yet and wont do so untill December if I can help it.

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deec 1 year, 5 months ago

It's funny how if there's a mild winter, gas prices go up. If winter is harsh, prices go up. Here's some interesting info about natural gas, which doesn't seem to mesh very well with the rhetoric used to raise prices.

http://www.eia.gov/naturalgas/weekly/

"Lower 48 working natural gas inventories as of October 31, 2012 were at an end-of-season record of 3,923 billion cubic feet...However, continued strong natural gas production ensured that inventory levels continued to grow. Both the Producing and West Regions’ inventories reached record end-of-season levels of 1,283 Bcf and 546 Bcf, respectively. Inventories in the East region reached 2,095 Bcf, which is 2.0 percent higher than that region’s five-year average."

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viva_la_revolucion 1 year, 5 months ago

So what about this "growth" of shale natural gas I keep hearing about?

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sierraclub 1 year, 5 months ago

Coal is the cheapest way to go. Not everyone can afford the expense of renewable energy.

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Centerville 1 year, 5 months ago

Natural gas has a whole new customer base: wind energy, thus the price will rise due to the demand for it. With wind turbines in the generation mix, natural gas turbines have to be running continuously to make up for changes in wind speed. That's why natural gas producers and royalty owner say "Viva Wind Power!".

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sierraclub 1 year, 5 months ago

With no competition from a new coal plant, the prices will just keep rising!!!!

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