Washington (Platts)--22Sep2014/353 pm EDT/1953 GMT

US residential and commercial natural gas customers can anticipate more normal temperatures this winter, but the price they pay for gas will be "slightly higher" than last winter because of the growing competition from industrial and electric generation users, the American Gas Association said Monday.

This year, local distribution companies have been competing with those segments for gas to refill their storage facilities, which were depleted by last winter's record low temperatures, said Chris McGill, AGA vice president of policy analysis.

Last winter was characterized by a string of polar vortexes that resulted in prolonged periods of deep cold in key consuming regions. The US set a single-day record for gas use on January 7, 2014, or 139 Bcf -- almost double the overall daily average, AGA noted.

Looking forward, McGill said the commodity price of gas has been about 9% higher than the price paid last year. The fixed charge delivery cost of the gas is about 1.5% higher.

As a result of these factors, he said that residential home heating bills will probably increase about "7% on average this winter."

The price hikes could have been much higher were it not for the fact that gas "is much more abundant than it had been in recent years," he said. He said gas production today is about 4 Bcf/d higher than it was a year ago.

The unprecedented demand for gas last winter justified the investment by many LDCs in storage operations or buying capacity from third parties, he said.

That investment in infrastructure, McGill said, is "how we have gotten to where we are today. A well-planned, critical infrastructure development is a key to the future."

Despite the record demand for gas last winter, he said a recent survey of 84 AGA member companies showed that "only a few" were contemplating the possibility of buying access to more storage capacity. McGill said that the companies believe they have all the storage capacity they need.

US storage inventories now stand at about 2.9 Tcf, AGA noted. With mild weather expected in much of the country this fall, strong supply injections could continue past November 1, with AGA saying inventories may reach a peak 3.5 Tcf this fall.

LDCs have been able to refill their storage facilities this summer largely because of the growing supply of natural gas, McGill said, noting that dry gas production in August "ran slightly above 69 Bcf/d. In 2006, it was 52 Bcf/d."

"We are actually in a stronger supply position today than we were last year," McGill said.

The new gas supplies are coming from recently developed shale gas reserves and "we still have new areas that are adding additional amounts to gas supply into the market place."

Further out, McGill said the AGA believes that by 2022, investments in industrial capacity will result in an increase in demand of 6 Bcf/d. Exports of liquefied natural gas will climb to 6 Bcf/d, and the retirement of 40 to 60 GW of coal-fired power generation will lead to a 4 Bcf/d increase in gas demand by 2022, he said.

He noted the US is now exporting 2 Bcf/d of gas to Mexico and that is expected to double in the next five years.

--Rodney White, rodney.white@platts.com
--Edited by Katharine Fraser, katharine.fraser@platts.com

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