Natural Gas Bills Expected to Increase Across the U.S. This Winter: EIA

U.S. households that mainly use natural gas for heating are expected to pay on average $931 on heating during the winter period, which runs from October to March, according to an Oct. 17 report from the U.S. Energy Information Administration. This is $206, or 28 percent, higher compared to the previous year.

The price of natural gas has risen in the U.S. during 2022, due to supply failing to keep pace with strong demand. Moreover, low storage levels have further contributed to the bullish price sentiment. Strong export demand for U.S. gas and the higher gas price in foreign markets continues to make exporting financially attractive and creates supply tightness in the domestic U.S. market.

The U.S. Census Bureau in its American Community service reports that natural gas is the main heating fuel for around 47 percent of U.S. homes. Accordingly, the retail price of natural gas and any movements on the wholesale market due to supply or demand fundamentals, which impact the retail price determine how much households spend on their winter gas bills.

The rise in retail prices reflects increasing natural gas spot prices over the past year. The U.S. EIA estimates the natural gas spot prices at the U.S. benchmark Henry Hub will rise by 54 percent this winter, in comparison to last winter to average $7.26 per million British thermal units. Alterations in the natural gas spot prices are echoed in retail prices over a period of months, due to the method in which these costs are treated in regulated rates.

The amount of gas consumption could also be a driver of natural gas bills. Demand for gas is usually significantly higher when temperatures are forecast to be below seasonal normal. This winter the U.S. IEA projects colder temperatures and marginally higher demand. The administration expects higher consumption to also impact the natural gas bill, however, for the upcoming winter retail natural gas prices are the key driver for bills. The U.S. EIA estimated retail natural gas prices to rise 22 percent from $13.02 per thousand cubic feet (mcf) last winter to $15.95/mcf this winter.

Spot price hikes from previous years can also impact current retail prices.  During February 2021, following Winter Storm Uri, regional natural gas spot prices nearly hit record highs. Thereafter, spot prices swiftly returned to normal before winter storm price levels. As a result of this a number of utility companies in states impacted by the storm filed requests with their public utility commissions outlining proposals to recoup the significantly high natural gas costs they experienced, as a result of the winter storm.