On October 21, 2010, the Federal Energy Regulatory Commission (“FERC” or the “Commission”) released the winter 2010-2011 Energy Market Assessment (the “assessment”) and presented the results at FERC’s October public meeting. The assessment highlighted the thriving gas market, and FERC staff emphasized that gas has reached the highest level of production in 35 years. Gas prices are also moderate and stable, and storage is approximately 90 percent full with additional time left for injection. Shale gas production was cited for the decrease in drilling costs and the increase in gas production and as drilling becomes more efficient, the cost of gas is expected to continue to decline.
The notable increase in gas production was also cited as the reason for the change in the Northeast in fuel supply mix. In the Northeast, Canadian gas imports have decreased by 50 percent since October 2009. However, Canadian gas has still continued to be supported in the West to help moderate prices in the summer. Further, the new pipelines in the Northeast are credited with diversifying supply options for the region.
One national trend is the decrease of liquefied natural gas (“LNG”) imports for 2010. This is primarily due to the drop in gas prices in the United States, and the global demand for liquefaction capacity grew by 30 percent. Unless domestic prices for gas rise sharply, the LNG imports are not expected to increase.
Nationally, storage is below last year’s levels, but production this autumn has increase to where gas storage is projected to be close to last year’s mark. Other fuels are considered to be high going into winter.
This winter is expected to show a continued decrease in price trends; weather is the greatest variable to affect prices, and the South is expected to a be mild for the season. A normal winter is predicted for the lower Midwest and Northeast, while the upper Midwest and Northwest are expected to be colder than average. Also, forward winter electric prices are 13-27 percent less than last year’s forward prices.