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Gas industry

Natural Gas Prices at 19-Month Lows Attract Dual-Capacity Power Generators

Strategic Insights

— 1 min read

Washington's ongoing supply gluts have driven natural gas prices to 19-month lows, making it an attractive option for dual-capacity power generators this fall. Industry sources report that natural gas prices have fallen to $1.66/MMBtu, while fuel oil prices remain relatively high at $2.70/MMBtu. Consumers Power Co.'s 638 megawatt generator, a dual-capacity peaking plant, has started buying natural gas supplies due to falling gas prices, with plant manager Jay Blessick expecting to continue purchasing gas as long as prices stay below $1.80/Mcf and oil prices remain steady.

Key Takeaways:

  • Natural gas prices have fallen to $1.66/MMBtu, a 19-month low, while fuel oil prices remain at $2.70/MMBtu.
  • Dual-capacity power generators, like Consumers Power Co.'s 638 megawatt generator, are switching from burning fuel oil to natural gas due to low gas prices.
  • Jay Blessick, plant manager, expects to continue purchasing natural gas as long as prices stay below $1.80/Mcf and oil prices remain steady.
  • Natural gas consumption by electric utilities reached a monthly high in August 1993 at 357 Bcf and a low in February 1993 at 161.9 Bcf, according to the Energy Information Administration (EIA).
  • Natural gas prices were at least 10% higher than low-sulfur resid prices from last November 1993 to February 1994, said Susan Harkins Bertsch, a senior analyst at Bonner & Moore.
  • Houston Power and Light Co. (HPL) switched some of its operations to fuel oil last winter, but has since switched back to natural gas as prices have dropped.

Statistics:

  • Prices for natural gas closed on the New York Mercantile Exchange at $1.66/MMBtu.
  • Cash price for 0.3% sulfur No. 6 fuel oil at New York Harbor was $2.70/MMBtu.
  • Consumers Power Co.'s 638 megawatt generator is buying natural gas at the wellhead price of $1.40/Mcf.
  • Natural gas deliveries to electric utility consumers reached a monthly high in August 1993 at 357 Bcf and a monthly low in February 1993 at 161.9 Bcf, according to the EIA.
  • Natural gas prices were at least 10% higher than low-sulfur resid prices from last November 1993 to February 1994.

Sources:

  • Washington industry sources
  • New York Mercantile Exchange
  • Energy Information Administration (EIA)
  • Susan Harkins Bertsch, senior analyst at Bonner & Moore
  • Consumers Power Co.
  • Houston Power and Light Co. (HPL)

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