Documents
Resources
Learning Center
Upload
Plans & pricing Sign in
Sign Out

acsf navigant - natural gas savings

VIEWS: 14 PAGES: 9

  • pg 1
									             Estimates of Consumer Savings from Natural Gas Price Decline
                                          April 2007 through March 2010
                                                      February 12, 2010
                                             Richard G. Smead, Director
                                              Navigant Consulting, Inc.


Summary of Findings

✦      As a result of declines in wellhead prices for natural gas, U.S. residential retail natural gas costs
       from April 2009 through March 2010 are over $6.4 billion lower than in the twelve months
       ended March 2008 and over $9.3 billion lower than in the twelve months ended March 2009
       (Study, Exhibit 1).

✦      These declines will have a direct cost-saving impact for heating customers throughout the
       nation, in particular in high-heating-load regions. In New York and Illinois, for example, the
       average customer savings from 2008-2009 to 2009-2010 amount to $155 and $301 respectively.
       Nationally, the average savings level is $144 (Study, Exhibit 3). These savings levels are
       understated for heating customers. The residential customer base includes many gas users who
       do not have gas heat. Thus, the heating-customer population is smaller and the savings per
       customer will be larger than the averages.

✦      Further, declines in wellhead prices, as reflected by Henry Hub spot prices. result in
       significantly larger savings than are currently reflected in retail rates. The total savings vs.
       2008-2009 from the drop in Henry Hub prices is expected to amount to over $18 billion, with
       average savings for New York, Illinois, and nationwide average residential customers of $351,
       $449, and $281, respectively (Study, Exhibit 4).

✦      Energy costs have generally declined through the economic downturn. However, a comparison
       of natural gas with gasoline and heating oil indicates that its prices have fallen farther and
       stayed lower. Over the two years since February 2008, natural gas prices as reflected by Henry
       Hub have declined by 37 percent, whereas gasoline and heating oil have declined only 10
       percent and 15 percent respectively (Study, Exhibit 2). This steep decline in natural gas prices
       has coincided with the rapid increase in production led by unconventional sources, such as shale
       gas, with 2008 and 2009 U.S. production levels each approximately 9% higher than 2007.




American Clean Skies Foundation
750 1st St., NE, Suite 1100 Washington, DC 20002 T 202.682.6294 F 202.682.3050 info@cleanskies.org www.CleanSkies.org
Navigant Consulting, Inc.
1801 K St., NW, Suite 500 Washington, DC 20001 T 713.646.5029 F 202.973.2401 rsmead@navigantconsulting.org www.navigantconsulting.com
           Estimates of Consumer Savings from Natural Gas Price Decline
                                  April 2007 through March 2010 1
                                    Methodology and Data Sources



Methodology:

✦     Based on US Energy Information Administration (EIA) data


✦     Residential volumes and actual prices were available through Nov 09


✦     For Dec 09 through Mar 10, EIA Short Term Energy Outlook estimates were used.


✦     In the "Comparison of Henry Hub with Gasoline and Oil" in Exhibit 3, Henry Hub prices, retail
      gasoline prices, and retail heating oil prices were compared on an indexed basis from February
      2008 through February 2010, in order to capture two complete annual cycles.


✦     Exhibit 4 evaluates "Implied Savings Based on Henry Hub Prices. In making this evaluation, the
      gas-cost component of rates was replaced by the same volumes priced at Henry Hub index
      prices. With this replacement, a larger decline in cost is indicated than has yet been apparent in
      retail rates, most likely due to lag in gas-cost tracking and the effect of storage.




1This study was performed for the American Clean Skies Foundation (ACSF).   Questions and methodologies were developed
collaboratively with ACSF staff.



                                                                                                                         2
  Exhibit 1: Comparison of Total US Residential Gas Cost by Period


                     Volume                     Cost
      Period         MMcf                    $ X million
Apr 07 - Mar 08       4,751,400                     62,220     Cost Reduction
Apr 08 - Mar 09       4,803,346                     65,146   vs. 07-08   vs. 08-09
Apr 09 - Mar 10       4,806,853                     55,808     (6,412)      (9,338)

                     Volume       Price         Cost
                     MMcf         $/Mcf      $ X million
           Apr-07       407,845      13.28      5,416
           May-07       215,678      14.63      3,155
           Jun-07       137,227      16.23      2,227
            Jul-07      117,558      16.67      1,960
           Aug-07       111,838      16.68      1,865
           Sep-07       116,446      16.00      1,863
           Oct-07       173,859      14.55      2,530
           Nov-07       404,467      13.00      5,258
           Dec-07       715,430      12.17      8,707
            Jan-08      881,151      12.07     10,635
           Feb-08       816,411      12.42     10,140
           Mar-08       653,490      12.95      8,463
           Apr-08       388,850      14.29      5,557
           May-08       229,491      16.03      3,679
           Jun-08       143,339      18.39      2,636
            Jul-08      117,647      20.24      2,381
           Aug-08       110,497      19.60      2,166
           Sep-08       117,011      17.91      2,096
           Oct-08       214,837      15.19      3,263
           Nov-08       426,508      13.62      5,809
           Dec-08       766,460      12.64      9,688
            Jan-09      941,269      12.39     11,662
           Feb-09       750,456      12.18      9,141
           Mar-09       596,981      11.84      7,068
           Apr-09       391,653      11.58      4,535
           May-09       202,905      12.51      2,538
           Jun-09       142,505      13.81      1,968
            Jul-09      119,578      14.83      1,773
           Aug-09       112,643      15.12      1,703
           Sep-09       119,331      14.36      1,714
           Oct-09       249,482      11.62      2,899
           Nov-09       375,036      11.25      4,219
           Dec-09       760,740      10.43      7,935
            Jan-10      924,110      11.15     10,304
           Feb-10       776,160      11.40      8,848
           Mar-10       632,710      11.65      7,371




                                                                                      3
               Exhibit 2: Comparison of Henry Hub NG Prices
                       with Gasoline and Heating Oil


             NGHHMCF            MG_TT_US           D200100002
             NGHHMCF            MGEIAUS            D2RCUUS


                          U.S. All Grades All
            Natural Gas   Formulations Retail U.S. No 2 Distillate
  Date     Henry Hub Spot                      Residential Price
                            Gasoline Prices
               Price                            by All Sellers
                           (including taxes)

           Henry Hub Spot                         Residential
               Price      Retail Gasoline Price Heating Oil Price         Indexed to Feb 08

 Mo/Yr         $/Mcf            cents/gallon       cents/gallon      Henry Hub   Gasoline     Oil
Feb-2008         8.80              307.8              318.1            1.000      1.000     1.000
Mar-2008         9.70              329.3              347.5            1.102      1.070     1.092
Apr-2008        10.49              350.7              362.6            1.192      1.139     1.140
May-2008        11.61              381.5              392.1            1.319      1.239     1.233
Jun-2008        13.07              410.5              420.4            1.485      1.334     1.322
Jul-2008        11.42              411.4              429.6            1.298      1.337     1.351
Aug-2008         8.50              383.3              386.6            0.966      1.245     1.215
Sep-2008         7.90              375.6              366.7            0.898      1.220     1.153
Oct-2008         6.94              311.2              316.9            0.789      1.011     0.996
Nov-2008         6.88              220.8              277.9            0.782      0.717     0.874
Dec-2008         5.99              174.5               245             0.681      0.567     0.770
Jan-2009         5.40               184               242.2            0.614      0.598     0.761
Feb-2009         4.65              197.5              230.7            0.528      0.642     0.725
Mar-2009         4.08              201.1              220.8            0.464      0.653     0.694
Apr-2009         3.60              210.2              220.9            0.409      0.683     0.694
May-2009         3.95              231.6              216.2            0.449      0.752     0.680
Jun-2009         3.91              268.1              230.2            0.444      0.871     0.724
Jul-2009         3.49              258.2               225             0.397      0.839     0.707
Aug-2009         3.23               267                237             0.367      0.867     0.745
Sep-2009         3.06              260.9              234.1            0.348      0.848     0.736
Oct-2009         4.12              260.5              246.4            0.468      0.846     0.775
Nov-2009         3.77              270.6              259.9            0.428      0.879     0.817
Dec-2009         5.50              266.3              263.3            0.625      0.865     0.828
Jan-2010         5.63              276.9              270.1            0.640      0.900     0.849
Feb-2010         5.57              274.2              270.7            0.633      0.891     0.851




                                                                                                    4
                     Exhibit 2a: Comparison of Henry Hub NG Prices
                           with Gasoline and Heating Oil Chart




1.60


1.40


1.20


1.00
                                                                      Gasoline

0.80


0.60                                                                 Heating Oil



0.40
                                                    Henry Hub Natural Gas

0.20


  0
   Feb-2008   May-2008   Aug-2008   Nov-2008   Feb-2009   May-2009     Aug-2009    Nov-2009   Feb-2010


                    Henry Hub Natural Gas            Gasoline             Heating Oil




                                                                                                5
2



         Exhibit 3: Estimate of Average Savings, US and Representative States

                                              April to March Costs $X1000
                 No of Cust   07-08      08-09      09-10    08-09 to 09-10 Per Customer
New York          4,379,936 6,173,773 6,809,979 6,132,544         (677,435)     (155)
  Illinois        3,845,441 4,894,790 5,213,227 4,053,886       (1,159,341)     (301)
       US        64,927,174 62,219,546 65,145,594 55,807,550    (9,338,044)     (144)

              New York                                                           Illinois
                 Volume              Price             Cost                           Volume        Price       Cost
                  MMcf               $/Mcf          $ X 1000                           MMcf         $/Mcf     $ X 1000
     Apr-07           41,880             15.20         636,574                             40,110      11.52    462,066
    May-07            20,853             16.74         349,087                             19,505      12.71    247,910
     Jun-07           11,964             19.02         227,553                              9,107      15.14    137,877
      Jul-07           9,444             19.57         184,821                              8,861      15.45    136,907
    Aug-07             9,931             18.67         185,409                              8,785      15.02    131,945
     Sep-07            9,257             18.17         168,192                              8,472      14.34    121,491
     Oct-07           12,407             18.33         227,414                             15,467      12.39    191,630
    Nov-07            34,361             15.64         537,413                             35,048      10.71    375,367
    Dec-07            58,492             14.95         874,455                             65,002        9.81   637,669
     Jan-08           64,154             14.97         960,386                             79,631        9.67   770,032
     Feb-08           63,618             14.89         947,279                             84,900      10.39    882,107
    Mar-08            57,616             15.19         875,190                             68,652      11.65    799,791
     Apr-08           34,490             16.73         577,017                             43,204      12.95    559,495
    May-08            20,344             19.92         405,257                             21,190        15.6   330,558
     Jun-08           12,566             22.84         287,005                             12,706      18.49    234,942
      Jul-08           9,384             24.93         233,946                              8,739      22.14    193,471
    Aug-08             8,997             24.17         217,455                              8,524      21.85    186,243
     Sep-08           10,104             21.64         218,641                              8,569      18.65    159,808
     Oct-08           18,812             18.40         346,132                             17,576      14.37    252,564
    Nov-08            35,463             16.55         586,907                             35,183      12.74    448,227
    Dec-08            57,309             16.33         935,858                             75,488      10.65    803,947
     Jan-09           77,199             15.56 1,201,210                                   91,679        9.44   865,449
     Feb-09           65,109             14.93         972,072                             74,967        9.16   686,702
    Mar-09            56,397             14.69         828,479                             59,905        8.21   491,822
     Apr-09           37,209             14.27         530,973                             40,602        7.47   303,298
    May-09            18,660             14.12         263,482                             17,943        9.81   176,022
     Jun-09           12,243             16.91         207,027                             12,358      11.85    146,445
      Jul-09           9,672             18.33         177,296                              9,053      14.16    128,190
    Aug-09             9,690             17.91         173,540                              8,387      14.46    121,272
     Sep-09           10,287             17.84         183,520                              9,164      13.23    121,234
     Oct-09           20,425             14.79         302,086                             23,138        9.06   209,628
    Nov-09            30,640             15.06         461,440                             31,717        8.64   274,037
    Dec-09            57,309             14.24         816,082                             75,488        7.82   590,316
     Jan-10           77,199             14.96 1,154,891                                   91,679        8.54   782,938
     Feb-10           65,109             15.21         990,303                             74,967        8.79   658,964
2
    Mar-10            56,397             15.46         871,905
    Simple average used here to reflect impact of storage leveling prices between seasons. 59,905        9.04   541,543


                                                                                                                     6
               Exhibit 4: Implied Savings Based on Henry Hub Prices


           Henry Hub
           Spot Price
             $/Mcf                                                 07-08  08-09
Apr-2007      7.83                   Total Res Cost ($ X million) 62,220 65,146         per Exhibit 1
May-2007      7.87                         Consumption (MMcf) 4,751,400 4,803,346       per Exhibit 1

Jun-2007      7.57                  Average Henry Price ($/Mcf)    7.55    8.08         Simple Average 2
Jul-2007      6.41      Effective embedded gas cost ($ X million)   35,893     38,799
Aug-2007      6.40            Implied Delivery Cost ($ X million)   26,327     26,347
Sep-2007      6.26
Oct-2007      6.95                  Consumption 09-10 (MMcf) 4,806,853 per Exhibit1
Nov-2007      7.32                    Average Henry Price 09-10    4.28   Simple average 2
Dec-2007      7.32         Gas Cost at Henry Price ($ X million) 20,553
Jan-2008      8.22                 Delivery Cost per 2007 - 2009 26,337
Feb-2008      8.80         Total Implied Cost 09-10 ($ X million) 46,890
Mar-2008      9.70                 Drop from 07-08 ($ X million) (15,330)
Apr-2008     10.49                 Drop from 08-09 ($ X million) (18,256)
May-2008     11.61                    Unit Cost Drop from 80-09      (3.80)
Jun-2008     13.07
Jul-2008     11.42
Aug-2008      8.50
Sep-2008      7.90
Oct-2008      6.94             Summary--$ in Billions
Nov-2008      6.88                                       Gas        Delivery   Total
Dec-2008      5.99                   Apr 07 - Mar 08     35.9        26.3       62.2
Jan-2009      5.40                   Apr 08 - Mar 09     38.8        26.3       65.1
Feb-2009      4.65                   Apr 09 - Mar 10     20.6        26.3       46.9
Mar-2009      4.08
Apr-2009      3.60
May-2009      3.95             Average Customer Savings per Methodology from Exhibit 3 at ($3.80)
Jun-2009      3.91                                   Volume     Savings
Jul-2009      3.49                     Customers     MMcf     $ X Million Per Customer
Aug-2009      3.23           New York 4,379,936 404,840 (1,539)                (351)
Sep-2009      3.06             Illinois 3,845,441 454,401 (1,727)              (449)
Oct-2009      4.12                  US 64,927,174 4,806,853 (18,274)           (281)
Nov-2009      3.77
Dec-2009      5.50
Jan-2010      5.63
Feb-2010      5.57
Mar-2010      5.48




                                                                                                        7
3



                     Exhibit 5: U.S. Residential Cost of Natural Gas Service
                                   April 2007 through March 2010 1 2




1 Source:   EIA History, EIA STEO, 09-10 estimated per Henry Hub Natural Gas price, analysis by Navigant Consulting Inc.

2 Gas   cost based on Henry Hub, delivery cost net from actual bills for Years 1 & 2, carried forward to current year on unit basis.




                                                                                                                                       8
                Exhibit 6: Raw Data from Energy Information Administration


Blue Font - EIA Actual Data
Black Font - EIA's STEO, Jan 12, 2010

            EIA Sourcekey        N3010US3          NGHHMCF          MG_TT_US          D200100002
               STEO              NGRCUUS           NGHHMCF           MGEIAUS           D2RCUUS          NGRCPUS
                                                             PRICE                                      VOLUME
                             U.S. Price of Natural Natural Gas  U.S. All Grades All    U.S. No 2       U.S. Natural
              EIA Data
  Date                         Gas Delivered to    Henry Hub Formulations Retail        Distillate    Gas Residential
             Description                                          Gasoline Prices   Residential Price Consumption
                            Residential Consumers Spot Price
                                                                 (including taxes)   by All Sellers
                                                                                      Residential       Residential
               Short         Residential Natural Henry Hub        Retail Gasoline
                                                                                      Heating Oil      Natural Gas
             Description           Gas Price        Spot Price         Price
                                                                                         Price         Consumption
 Mo/Yr         Season               $/Mcf             $/Mcf         cents/gallon      cents/gallon        MMcf
 Jan-2007        W                  12.09              6.75            228.9              231.1           802,159
 Feb-2007        W                  12.11              8.24            232.3              239.1           899,072
 Mar-2007        W                  12.86              7.32            260.9              244.9           615,732
 Apr-2007        S                  13.28              7.83            289.1               248            407,845
 May-2007        S                  14.63              7.87            318.7               248            215,678
 Jun-2007        S                  16.23              7.57            310.2              249.2           137,227
 Jul-2007        S                  16.67              6.41            301.1              254.9           117,558
 Aug-2007        S                  16.68              6.40            283.4              250.9           111,838
 Sep-2007        S                  16.00              6.26            284.9              260.9           116,446
 Oct-2007        S                  14.55              6.95            285.3              275.9           173,859
 Nov-2007        W                  13.00              7.32            312.8               304            404,467
 Dec-2007        W                  12.17              7.32             307               309.8           715,430
 Jan-2008        W                  12.07              8.22            309.5              313.8           881,151
 Feb-2008        W                  12.42              8.80            307.8              318.1           816,411
 Mar-2008        W                  12.95              9.70            329.3              347.5           653,490
 Apr-2008        S                  14.29             10.49            350.7              362.6           388,850
 May-2008        S                  16.03             11.61            381.5              392.1           229,491
 Jun-2008        S                  18.39             13.07            410.5              420.4           143,339
 Jul-2008        S                  20.24             11.42            411.4              429.6           117,647
 Aug-2008        S                  19.60              8.50            383.3              386.6           110,497
 Sep-2008        S                  17.91              7.90            375.6              366.7           117,011
 Oct-2008        S                  15.19              6.94            311.2              316.9           214,837
 Nov-2008        W                  13.62              6.88            220.8              277.9           426,508
 Dec-2008        W                  12.64              5.99            174.5               245            766,460
 Jan-2009        W                  12.39              5.40             184               242.2           941,269
 Feb-2009        W                  12.18              4.65            197.5              230.7           750,456
 Mar-2009        W                  11.84              4.08            201.1              220.8           596,981
 Apr-2009        S                  11.58              3.60            210.2              220.9           391,653
 May-2009        S                  12.51              3.95            231.6              216.2           202,905
 Jun-2009        S                  13.81              3.91            268.1              230.2           142,505
 Jul-2009        S                  14.83              3.49            258.2               225            119,578
 Aug-2009        S                  15.12              3.23             267                237            112,643
 Sep-2009        S                  14.36              3.06            260.9              234.1           119,331
 Oct-2009        S                  11.62              4.12            260.5              246.4           249,482
 Nov-2009        W                  11.25              3.77            270.6              259.9           375,036
 Dec-2009        W                  10.43              5.50            266.3              263.3           760,740
 Jan-2010        W                  11.15              5.63            276.9              270.1           924,110
 Feb-2010        W                  11.40              5.57            274.2              270.7           776,160
 Mar-2010        W                  11.65              5.48            274.6              269.2           632,710




                                                                                                              9

								
To top