Arkansas, U.S. Winter Heating Bills To Drop Well Below Last Year

Heating bills for the average U.S. household are expected to well below a year ago because of milder weather, lower fuel prices and weaker heating demand this winter, according to the U.S. Energy Information Administration short-term energy and winter fuels outlook released today.

The EIA forecast shows that expenditures for natural gas, heating oil, and propane during the upcoming winter heating season (Oct. 1 through March 31) will be 10%, 25%, and 18% lower, respectively, than last winter. Forecast lower heating demand and relatively unchanged prices contribute to electricity expenditures that are 3% lower than last winter.

LOWER UTILITY RATES
As a result of the lower natural gas prices, several large utilities have filed adjustment requests to reduce residential bills in several states. Gas prices, which closed Tuesday (Oct. 6) on the New York Mercantile Exchange at $2.47 per million British thermal units, are expected to remain below $3 through January as stockpiles head toward an all-time high by the end of this month.

Public Service Electric and Gas Co. (PSE&G), New Jersey’s largest utility, announced in mid-September it will reduce residential natural gas bills this winter by 5.7%, saving customers it that state almost $52 per year. The reduction was approved by the New Jersey Board of Public Utilities, enabling PSE&G to reduce its basic gas supply rate to 40 cents from 45 cents – the utility’s lowest rate in 15 years.

Georgia Power, the largest subsidiary of Southern Company, one of the nation’s largest generators of electricity, said it has filed a request with the Georgia Public Service Commission (PSC) to reduce fuel rates by 11%, or approximately $268 million, in annual fuel billings. The decrease in fuel costs is primarily driven by lower natural gas prices as a result of increased natural gas supplies driven by strong production levels, utility officials said.

Earlier this year, Centerpoint Energy filed a gas supply rate (GSR) adjustment with the Arkansas Public Service Commission due to falling wellhead prices tied to the cost of natural gas. That adjustment lowered residential gas bills for Centerpoint customers by 14% compared to last year. For instance, a $65.48 last April is $55.92 this month.

At the time, CenterPoint spokeswoman Alicia Dixon said typically the Houston-based gas utility files two rate adjustment schedules in Arkansas twice a year, once in the spring and again in the fall. Dixon said the company currently has 430,000 residential, commercial and industrial customers across the state.

AVERAGE HOUSEHOLD COSTS
According to EIA’s Winter Fuels Outlook, average household expenditures for homes heating primarily with natural gas will total $578 this winter, a $64 decline from last winter’s average. Homes primarily using propane are expected to spend $1,437 this winter, about $322 less than a year ago.

Homes heating primarily with heating oil are expected to spend $1,392, or $459 less. Homes heating primarily with electric heat are expected to spend $930, about $30 below costs last winter.

Most regions of the country are expected to have warmer weather this winter. The Northeast, Midwest, and South are expected to be about 13%, 11%, and 8% warmer, respectively, based on forecasts from the National Oceanic and Atmospheric Administration (NOAA). The West, which had unusually warm weather last winter, is expected to have 12% cooler weather.

Because weather patterns present great uncertainty to winter energy forecasts, EIA’s Winter Fuels Outlook includes projections for 10% colder and 10% warmer scenarios. Also, the choice of heating fuel varies considerably by region, resulting in regional differences in total expenditures, the EIA said.

Natural gas is the primary space heating fuel in every region except the South, where electric heating is more prevalent. However, heating oil is much more common in the Northeast than in other regions, while propane is more common in the Midwest than it is elsewhere, although it is still a small portion of the total.

Other highlights of the EIA’s short-term energy outlook are below.
• North Sea Brent crude oil prices averaged $48 per barrel in September, a $1 per barrel increase from August. However, volatility remained high during September, and EIA forecasts that Brent crude oil prices will average $54 per barrel in 2015 and $59 barrel in 2016, unchanged from last month’s STEO. Forecast West Texas Intermediate (WTI) crude oil prices average four dollars a barrel lower than the Brent price in 2015 and $5 per barrel lower in 2016.

• U.S. regular gasoline monthly retail prices averaged $2.37 per gallon in September, a decrease of 27 cents per gallon from August and $1.04 per gallon cheaper than in September 2014. EIA expects monthly gasoline prices to decline to an average of $2.03 per gallon in December 2015, while U.S. regular gasoline retail prices are forecasted to average $2.38 per gallon in 2016.

• EIA estimates that total U.S. crude oil production declined by 120,000 barrels per day in September compared with August. Crude oil production is forecast to decrease through mid-2016 before growth resumes late in 2016. Projected U.S. crude oil production averages 9.2 million barrel per day in 2015 and 8.9 million in 2016.

• Natural gas working inventories were 3,538 billion cubic feet (Bcf) on September 25. This level was 15% higher than a year ago and 4% higher than the previous five-year average (2010-14) for this week. EIA projects inventories will close the injection season at the end of October at 3,956 Bcf, which would be the highest end-of-October level on record.