EIA: changes in US residential natural gas prices lag spot prices – Hydrocarbon Engineering

by | Sep 23, 2023 | Engineer

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Changes in retail natural gas prices lag changes in wholesale natural gas prices, largely due to the nature of utility regulation. Over longer periods, changes in natural gas wholesale and retail prices are more closely correlated.
Residential consumer prices for natural gas have two major components: costs incurred to buy wholesale natural gas and the related transportation and distribution charges. Because the fixed costs are spread over the smaller volumes used by customers in warm weather, residential natural gas prices are usually highest in the summer and lowest in the winter on a per unit basis when all charges are combined.
 
 
How often LDCs are required to calculate their PGAs can vary from state to state and from company to company. In general, in times of stable prices, the frequency of these calculations can range from annually to as often as monthly. In periods of high spot price volatility, such as the record volatility in 2022, many PUCs allow LDCs to file motions to make more frequent adjustments. This flexibility allows utility natural gas cost changes to be reflected in smaller increments rather than all at once.
In some cases, such as during an extreme weather event, LDCs will request the ability to add additional charges to utility bills. For example, natural gas spot prices approached record highs following Winter Storm Uri in February 2021, especially in the Midwest. Many LDCs in states affected by the storm filed motions with their states’ PUCs detailing plans to recover the extremely high natural gas costs they had incurred following the winter storm. The goal of these plans was to spread the high natural gas costs to consumers over several years.
Read the article online at: https://www.hydrocarbonengineering.com/gas-processing/20092023/eia-changes-in-us-residential-natural-gas-prices-lag-spot-prices/
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