Southwestern Pa. enjoying low natural gas prices after large drop ... - TribLIVE

Southwestern Pa. enjoying low natural gas prices after large drop from last year | TribLIVE.com

Southwestern Pa. enjoying low natural gas prices after large drop from last year

Historic levels of natural gas production are among factors leading to low commodity prices for natural gas in Southwestern Pennsylvania at the end of this year.

There are signs the prices could stay low moving into next year.

Overall, purchased gas prices for Pennsylvanians are down 9% to 65% compared to where prices were last year, according to Pennsylvania’s Public Utility Commission.

And the two utility companies that service the greater Pittsburgh region are charging the lowest rates of any company tracked by the PUC.

Peoples Natural Gas is charging $3.08 per 1,000 cubic feet of natural gas (Mcf). That’s an increase of $1.23 per Mcf compared to the previous quarter. Peoples said customers won’t actually see those increases in commodity rates on their bills thanks to credits the company is applying.

Nick Paradise, a Peoples spokesman, said when factoring the company’s Gas Cost Adjustment credit of $3.79 per Mcf, the actual gas cost rate for Peoples has decreased by $1.95 per Mcf or 86%. The credit is being applied to adjust to last year’s mild winter, said Paradise.

He said the credit is automatically applied to bills. Peoples expects average residential customers using 86 Mcf per year to have monthly bills about $14 cheaper this quarter compared to last.

Columbia Gas is charging about 28 cents per 100 cubic feet, which works out to $2.88 per 1,000 cubic feet.

Both Southwestern Pennsylvania utilities are charging about $3 per 1,000 cubic feet of natural gas. That’s significantly lower than last winter, when Russia cut off natural gas to many parts of Europe. This caused a disruption in markets.

One Peoples customer, University of Pittsburgh regional economist Chris Briem, charted his payments on social media over the past year, and his rates in November and December 2022 were over $8 per Mcf.

Jeremy Weber, a professor at Pitt’s Graduate School of Public & International Affairs, said in August 2022 that gas prices started to jump as Europe was struggling with natural gas supply as Russia cut off much of the continent, which set prices soaring, even in the United States.

Eventually, Weber said the market was able to supply Europe, thanks to a major boost from America sending a lot of liquified natural gas tankers to Europe, and a warmer than expected winter meant demand was not as high as expected.

By spring, natural gas commodity prices began to decline dramatically.

“Everyone, not just Pennsylvania, saw a decline from $9 to $3 per Mcf,” Weber said.

Those international factors helped, but Weber added that local factors are also keeping natural gas prices down in the Pittsburgh region.

He said the Appalachian region is producing natural gas at record amounts. According to the U.S. Energy Information Administration, the Appalachian region, which includes Southwestern Pennsylvania, has been producing about 36 billion cubic feet per day over the last half of 2023.

“Because we are not having the same degree of drill and build that Pennsylvania and Appalachia had in 2011-2012, people tend to think the natural gas boom era is busting, when in reality it has never produced as much gas,” said Weber.

He said the production growth is mostly leveling off in the region, but other factors could keep commodity prices low in the Pittsburgh region, at least in the short term.

Weber said local factors like the region’s efficiency at shipping away natural gas can affect commodity prices. Currently, hold-ups in the construction of natural gas infrastructure, like pipelines and storage, will keep local supply high and thus lower prices for consumers, Weber said.

“Regionally, we currently have strong production and limited takeaway capacity,” he said.

Another local factor that could affect natural gas prices moving forward is weather. Weber said if Pittsburgh sees some significant cold snaps, that will increase demand and could increase costs.

However, Pittsburgh meteorologists said the region is already lagging behind in snow totals and a fairly strong El Niño means the region will see some above average temperatures.

Weber said it’s hard to predict how weather and infrastructure will factor into natural gas prices, but he said last year’s mild winter and sustained strong gas production appear to be combining to cause very low prices for residents across the region.

So I can't speak to broader markets, but I just checked the math on my bill and yes, I am being paid to use natural gas (still have to pay to have it delivered). Has this happened locally in the past ever?

Corrected figure with the recent month values being negative.
pic.twitter.com/DvmTv5yVFj

— ???????????????????? ???????????????????? (@chrisbriem)
November 28, 2023

Briem showed his commodity charge for October at -18 cents per Mcf and for November at -71 cents per Mcf.

Weber said these events can happen, but he warned that they usually don’t stay for very long.

“We have seen in different regions in the U.S. crazy low and even negative prices in extreme situations,” said Weber. “This is not unheard of, but it usually doesn’t happen for very long.”

Ryan Deto is a Tribune-Review staff writer. You can contact Ryan by email at rdeto@triblive.com or via Twitter .