What is going on with natural gas in New England?

As an energy consultant and broker, it is part of my daily routine to keep track of the commodity because the impact is significant for the supply of electricity and natural gas. And I am happy to share that the knowledge transfer to our clients has resulted in significant savings.

There is a paradigm shift that started last winter. We experienced an average winter with cold temperatures, but absent was the typical spike in natural gas prices. As we all know, our region braces for higher rates when it becomes cold because of the pipeline constraints during high demand for heat and power generation. There was no rate spike last winter! It was liquefied natural gas (LNG) to the rescue, and it appears that this trend will continue. So, what is the strategy for budget certainty with third-party natural gas supply going forward?

Here’s what may happen: in the table below, the spot prices in both years is the black line and it shows that it reached about $80 per million BTU (MBTU) in 2017-18; but it did not exceed $15 in 2018-19. The difference comes from the deliveries of LNG. From November 2017 through March 2018, LNG imports into New England averaged 0.14 billion cubic feet per day (Bcf/d) and peaked at 0.88 Bcf/d on January 6 during the “bomb cyclone” event. From November 2018 through March 2019, LNG imports into New England averaged 0.24 Bcf/d and peaked at 1.48 Bcf/d on February 1. Although the region receives LNG from three facilities, it is the Canada Port facility in New Brunswick that boosted their supply capabilities that made a difference. That, coupled with limited cold-weather events, resulted in moderate natural gas rates and lower electric rates this summer.

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The expectation is that the region will have similar volumes for LNG during the 2019-20 winter season and beyond. There is, however, one caveat. All ‘bets are off’ when the region experiences sustained cold temperatures. This, along with the Energy Information Administration forecasting a flat line for gas prices of $2.70 per dekatherm (Dth) for the next several years, gives notice to hedge natural gas supply with 12-month terms to protect against cold snaps. This will yield budget certainty and a strong chance of outperforming the utility default during the winter months.

We hope this helps and your questions are welcomed.

Your friendly Neighborhood Energy.