Manufacturing

Consumers Energy promises 15 percent cut to natural gas rates

Average wholesale natural gas price fell 31 percent in 2012.

January 16, 2013
| By Pete Daly |
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Consumers Energy plans 15 percent cut to natural gas rates
Consumers Energy is one of the nation's largest combination utilities, providing electric and natural gas service to residents of Michigan. Image via fb.com

Consumers Energy has announced it plans to cut its natural gas price paid by its customers by 15 percent in April, on top of a previous drop in price of 10 percent since last winter.

The price cut includes commercial and industrial customers, as well as residential. Consumers has 1.7 million natural gas customers in 45 counties in Michigan’s Lower Peninsula.

“Prices charged by Consumers Energy for natural gas are the lowest they’ve been in a decade — since 2003,” said Tim Sparks , Consumers Energy’s vice president of energy supply operations. “We’re planning an additional 15 percent price reduction beginning in April and continuing at that level on a go-forward basis. As part of our promise to Michigan, we’re working hard to control our costs and help our gas customers manage their household budgets.”

The U.S. Energy Information Administration reported last week that the average wholesale price of natural gas across the country fell 31 percent in 2012.

At the Henry Hub in Erath, La., a benchmark location for natural gas pricing throughout the United States, the wholesale (or “spot”) price fell from an average $4.02 per million British thermal units (MMBtu) in 2011 to $2.77 per MMBtu in 2012. The government said it was the lowest average annual price at Henry Hub since 1999.

The EIA said last year’s mild winter, sustained high natural gas inventories, and increasing gas production in the Marcellus Shale and Eagle Ford basin contributed to the lower prices at Henry Hub.

Average spot prices at Henry Hub fell despite rising natural gas use for power generation, lower overall natural gas net imports from Canada by pipeline, reduced liquefied natural gas imports, higher natural gas exports to Mexico, and temporary production cuts related to Hurricane Isaac.

The EIA said total gas production was higher last year than in 2011; however, production did not increase much from the start of 2012 to its end.

Average annual prices for natural gas fell 30 to 34 percent at half of the 10 major trading locations in 2012, compared to 2011.

The largest annual average price decrease was 38 percent at the Transco Zone 6 NY hub, which serves the New York City metropolitan area. There the average price fell to $3.18 per MMBtu in 2012, down from an average of $5.15 per MMBtu in 2011.

Much of the increase in natural gas production in the Lower 48 is attributed to increased production in the Pennsylvania portion of the Marcellus Shale, as well as the adoption of more efficient drilling techniques and the industry targeting liquids-rich shale gas formations.

Consumers Energy said it operates 15 natural gas storage fields in Michigan’s Lower Peninsula, one of the largest systems of its kind in the nation.

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