Energy Markets Update
Weekly natural gas inventories
The U.S. Energy Information Administration reported last week that natural gas in storage increased by 26 Bcf. The five-year average withdrawal for March is about 59 Bcf. Total U.S. natural gas in storage stood at 1,415 Bcf last week, 19.7% less than last year and 14.7% lower than the five-year average.
US to boost LNG supplies to EU
- The United States will ramp up LNG supplies to the European Union to help Europe wean off Russian gas imports
- The US intends to supply an additional 15 billion cubic meters to Europe (~1.5 Bcf/d), approximately 10% of the 155 Bcm the EU market would take in from Russia in 2022
- The EU is planning to cut Russian gas demand by two-thirds by year-end and eliminate Russian energy imports entirely by 2027, with the U.S. slated to supply 50 Bcm of LNG by the end of the decade
- The EU has debuted a plan titled REPowerEU which seeks to diversify pipeline sources, increase renewable gases, and boost LNG imports to completely replace Russian energy resources
- Gas exports will be constrained by liquefaction capacity in the near term, which can take 4+ years to develop
- The stock prices of some US gas and oil suppliers have increased by as much as 50% on the news
Weekly US gas use plunges 18.6% amid warmer weather
- Total natural gas use in the U.S. plunged 18.6% in the week ending March 23 as temperatures rose and heating demand declined
- All sectors including residential, industrial, and power consumption dropped
- Overall total gas demand averaged 93.9 Bcf/d, a decrease from 110.4 the week earlier
- Along with the decrease in demand, LNG exports were up as 23 LNG vessels carrying a total of 85 Bcf left the U.S. between March 17 and March 23 compared to 82 Bcf the week prior
- Total gas supply was up slightly from 98.1 Bcf/d the week before to 98.4 Bcf/d
- Gas demand within the power sector has overall remained strong despite higher prices, a bullish indicator for forward prices
NY regulators mull over rate hikes for both transmission and distribution
- A rate recovery request for a $1.1 billion electric transmission project is facing pushback at the Federal Energy Regulatory Commission
- National Grid PLC subsidiary Niagara Mohawk Power Corp. asked FERC on March 4 to authorize an 11.5% ROE for the Smart Path Connect Project, which would upgrade around 100 miles of 230-kV transmission lines in northern New York to 345 kV
- Niagara Mohawk asked FERC to approve a base ROE of 10.5% for the project plus two additional 50-basis-point adders, one for special risks and challenges, and the other for its ongoing participation in the New York ISO
- The New York PSC protested the base point adders, claiming that Niagra Mohawk is already an NYISO member and that the risk incentive is unnecessary
- The project would allow for integration of more upstate renewables
- Downstate in metro NY, utility Con Edison has recently proposed record $2.7B and $1.0 B rate increases for electric and gas services respectively
- Both rate increases would take effect Jan 2023 and would be phased in over 3 years will annualized increases of about 14.5% on base delivery rates
- Con Edison’s request comes on the back of a 2020 settlement that was phased in from 2020-2022 and was about 25% of the current request
New Jersey to Shut Down Last Two Coal Plants
- An agreement was reached on March 23rd to shut down the last two coal plants in New Jersey at the end of May
- The 244-MW Chambers Cogeneration and 219-MW Logan coal-fired power plants were built in 1994 and the original PPAs for these plants were set to expire in 2024
- Atlantic City Electric Co., the local utility, will make fixed monthly payments for the remainder of the original PPA term
- Atlantic City Electric Co. says the move is expected to save utility customers a total of up to $30 million through 2024 while helping make the grid cleaner
- The majority owner of both plants plans to decommission and replace them with renewable energy generators
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