Natural Gas Winter Outlook
As we move towards the winter heating season, natural gas prices remain at levels not seen since the early part of this decade. The lack of a current threat to producing regions from hurricanes to date, extremely strong storage inventories, solid domestic production, reduced large-volume customer demand and a milder weather forecast seem to be influencing market players.
At this point in time, Alliant Energy anticipates that natural gas costs will be about 20-25 percent lower for the average residential customer this winter heating season compared to last year. This forecast is based on normal winter weather. As is always the case, weather has the potential to play a big role in what actually ends up happening because it can drive natural gas costs up or down.
Lower consumption, brought about by the economic slowdown, and higher production levels have been the primary contributors to lower natural gas prices over the last year. Current industry predictions are for natural gas prices to remain low through 2009 and into 2010 as a decrease in demand, particularly in the industrial sector, continues.
- Monthly Natural Gas Update email
- Frequently asked questions about natural gas prices for residential customers
- Frequently asked questions about natural gas prices for commercial and industrial customers
- Take the “10-Degree Challenge”
- Seven more ways to lower your heating bill
- Natural gas safety reminders
- Brochures and fact sheets
- Home heating assistance
If you're a business owner or manager, visit Energy Efficiency for Your Business. If you need one-on-one assistance, call our Business Resource Center or your account manager for expert advice.
If you're with the media, review our Natural Gas Prices Media Kit. As the winter heating season progresses, we'll be updating this information regularly.
Monthly Natural Gas Update for residential customers and the media
Alliant Energy's monthly Natural Gas Update is just one of the ways we are working to provide customers and the media with up-to-date information on the upcoming heating season. The email update focuses on natural gas prices and reviews average natural gas customer bill amounts and explains market forecasts and impacts.
How will the weather impact natural gas prices? Is there enough natural gas supply to meet this winter's demands if the weather is bitterly cold? How can I reduce my natural gas usage to save money? All these questions will be answered in the monthly email publication.
Want to receive the Monthly Natural Gas Update?
Customers who are not currently part of the Your Account program can receive the emails by signing up for the free and convenient Your Account service at www.alliantenergy.com/youraccount. Have your utility bill handy for fast and easy enrollment.
As a Your Account customer, you'll receive these on a monthly basis as part of our online customer service.
All media who receive our news releases via email are included in the distribution list for the Natural Gas Update. If you'd like to add a specific reporter's email or currently get Alliant Energy releases via fax and/or would like to receive the Natural Gas Update email, please contact: Steven Schultz at 608-458-3285 or stevenschultz@alliantenergy.com.
Frequently asked questions about natural gas prices for residential customers
How many homes are heated with natural gas in the U.S. and in Alliant Energy's service territory?
Natural gas is America's most popular home-heating fuel - heating more households than all other energy forms combined. In all, 51 percent of all heated U.S. households have natural gas heat. Of the remainder, 32 percent heat with electricity, 8 percent use fuel oil, 6 percent use propane and 2 percent use wood, kerosene or other fuels.
There are more than 420,000 Alliant Energy natural gas customers in Iowa, Minnesota and Wisconsin.
How do customers use natural gas?
Energy customers use natural gas in two ways. 1) Customers can have natural gas piped directly into their homes for use in furnaces, water heaters and gas stoves. 2) Indirectly, customers use natural gas when utilities generate electricity with natural gas-fired generating plants such as Alliant Energy's Emery Generating Station near Mason City, Iowa.
What is the outlook for natural gas prices this winter?
At this point in time, we anticipate natural gas costs for the average Alliant Energy residential customer for the 2009-2010 winter heating season (October 1 – March 31) will be around 20-25 percent lower than last heating season. This forecast is based on normal winter weather and it is important to remember that weather always has the potential to play a big role in what actually ends up happening, as it can drive natural gas costs up or down.
How are customers' natural gas prices calculated?
Prices for natural gas that is used by natural gas customers consist of three main costs:
- Transmission: transporting the natural gas from its origin to a local gas companies such as IPL and WPL. (10 percent)
- Distribution: transporting the natural gas through the IPL and WPL system to customers. (5 percent to 15 percent)
- The cost of the natural gas itself: this is driven by supply-and-demand in the market. (75 percent to 85 percent)
The cost of natural gas has become the largest portion of what customers pay for natural gas service. In addition, Alliant Energy customers also pay for natural gas as part of their electricity bill, since Alliant Energy uses natural gas to generate some electricity.
Does Alliant Energy profit from higher natural gas prices?
Alliant Energy does not profit from higher natural gas prices. It is a cost that is directly passed on to customers. When natural gas prices are high, so are the costs paid by customers. Along the same lines, when natural gas prices decrease, the cost to customers goes down.
The nation's 68 million natural gas customers have ridden a roller coaster of price swings in recent years. What's happening?
Natural gas is increasingly popular for use by homeowners, schools, businesses, factories and electric power-generation plants because it is efficient, clean, and reliable. As a result of increased demand, the market price of natural gas can be extremely volatile due to the tight balance between natural gas supply and demand.
A number of factors can influence wholesale natural gas prices:
- Disruptions to natural gas production caused by hurricanes.
- Amount of natural gas in storage.
- Mild or colder than normal winters that contribute to reduced or increased consumption.
- Summer use. For example, a “normal” summer in 2007 did not strain natural gas resources. Natural gas is increasingly used at newer “peaker” power plants (such as the Emery Generating Station near Mason City, Iowa) that generate extra electricity during periods of peak demand during summer heat waves.
What impact does weather have on natural gas prices?
Weather is often the biggest factor in how much residential customers pay for natural gas during the winter. Natural gas prices remain quite sensitive to weather, for three main reasons:
- Heating demand: The weather is a major factor in how much energy people use to heat their homes. If it's colder, people tend to use more energy. So even if the wholesale price of energy stays the same from one winter to the next, consumers will receive higher bills if they consume more energy than they did the year before.
- Cooling demand: An increasing amount of natural gas is being used to generate electricity. With warmer than normal late springs and early summers, operators of many power plants are prompted to buy larger volumes of natural gas in order to power air conditioning. An increased cooling-related demand pushes wholesale natural gas prices up. Note that many of the newer “peaker” power plants (such as the Emery Generating Station near Mason City, Iowa) that generate extra electricity during periods of peak demand - such as during summer heat waves -- run on natural gas.
- Natural gas production: Natural gas is a domestic energy source. Almost all (84 percent) of the natural gas consumed in the United States is produced in the United States. About 20 percent of the U.S. natural gas production comes from the Gulf of Mexico, making it a sensitive area during hurricane season. Most of the rest (13 percent) comes from Canada, with 3 percent imported as liquefied natural gas (LNG).
What steps is Alliant Energy taking to manage natural gas price volatility?
We want what our customers want: an ample supply of natural gas at affordable prices. Consumers love natural gas - but they don't like surprises. So, as a natural gas utility, we take a number of actions to stabilize natural gas prices and help our customers deal with fluctuations in their energy bills:
- Billing plans - Budget Billing is a balanced-billing plan that allows customers to spread their natural gas and electric costs over many months, which makes it easier for people to handle winter heating bills.
- Storage - Alliant Energy purchases natural gas in the late spring through early fall months and stores it underground for use throughout the heating season and on especially cold winter days. At this time, both IPL and WPL have enough natural gas in storage to meet typical heating demands for this heating season. By purchasing and storing natural gas we're able to protect against potential run-ups of prices on winters' coldest days.
- Locking-in - Alliant Energy is working hard for our customers by using financial tools to manage natural gas prices. For example, about two-thirds of the natural gas we distribute in an average winter will be at a locked-in price by the end of October - including natural gas in storage. Simply put, by acquiring physically stored natural gas, we can lock-in a price now which will help us avoid buying all of the needed natural gas at spot market prices during the volatile winter season when prices can be significantly higher.
- Contract terms - Just as homeowners shop around for food and household items, natural gas supply managers at Alliant Energy obtain natural gas supplies from a variety of sources and under different contract terms.
How can we continue to bring natural gas prices down?
You can reduce demand, increase supply or do both. With U.S. demand for natural gas projected to increase nearly 40 percent by 2020, reductions in demand (through energy efficiency and fuel-switching) are vital to helping to ease prices, but it is clear that natural gas supplies must increase. It is in consumers' best interest to do so.
Why is it so hard for natural gas producers to keep up with demand?
The thousands of companies that produce natural gas in the U.S. face some stiff challenges:
- Many wells that have produced abundant natural gas for years are becoming depleted. The number of producing gas wells has tripled since 1971 (from approximately 100,000 to more than 300,000) but production has declined - a clear indication that many existing natural gas basins are maturing.
- It is sometimes difficult and more costly to pull natural gas from mature producing areas. That's why it is important for producers to be able to move to fresh supply areas, and use the best technologies to find and produce more natural gas.
- Even when producers hold valid leases, they often face months of delays and red tape when getting federal or states permits to start working on bringing energy supplies to consumers.
- Nearly all of the natural gas consumed in this country is produced in North America. When natural gas production is slowed or halted in one area, there are few other sources available to make up for the loss.
Alliant Energy receives most of its natural gas from Canada, the U.S. mid-continent and regions other than the Gulf Coast; for the most part, the company has been spared the supply issues other utilities are dealing with, other than the price.
To increase natural gas supply, efforts to bring liquefied natural gas (LNG) into the U.S. from other countries have picked up momentum.
It's important to remember that natural gas is a finite resource no matter how much is left or where we get it from.
What can be done to alleviate the price fluctuations?
Efforts that can be taken in the short-term include:
- Use energy more efficiently - Before the winter begins, residential consumers can take steps such as replacing older furnaces with more efficient models, insulating or replacing windows, installing programmable thermostats or adding insulation. While efficiency alone can help, it cannot solve the problem on its own. Additional natural gas must be produced to keep up with significant increases in consumer demand. Visit our PowerHouse: Home Comfort Tips site for expert advice
- Expand low-income energy assistance - In anticipation higher winter heating bills, Congress should increase funding for the Low-Income Home Energy Assistance Program (LIHEAP) to its authorized spending limit of $5.1 billion. At its current ($2 billion) funding level, LIHEAP assists only one of every five eligible households. Most LIHEAP beneficiaries do not receive welfare or other forms of public assistance. Instead, they are typically working, retired or disabled persons with below-poverty income who receive $300 per year, on average, to pay toward a natural gas, fuel oil or electricity bill that averages $1,000. More than half of LIHEAP beneficiaries use natural gas heat.
- Increase natural gas supplies - Even a marginal increase in natural gas supplies could help dampen price increases. In the meantime, policy-makers should take steps to enable production companies to increase production from traditional and non-traditional natural gas supply areas, including the Outer Continental Shelf in the Gulf region.
Take the “10 Degree Challenge”
Want to lower your energy usage by ten percent? Just turn down your thermostat by 10 degrees for eight hours a day - you'll be saving money while you're working or sleeping. It's really that easy!
Here's how to make our “10 Degree Challenge” work for you:
- Invest in an ENERGY STAR& rated clock-programmable thermostat.
- Open curtains during the day, and close them at night.
- Do NOT close off vents in unused rooms. You won't save money, and condensation problems may arise.
- Avoid using space heaters (electric, kerosene or propane). They're expensive to operate and quite dangerous.
- To prevent water pipe damage, go no lower than 55 degrees.
Learn more about buying and using a programmable thermostat
Seven more ways to lower your heating bill
If you're ready to save even more, try a few more home energy conservation tips. These low-cost or no-cost ideas can make a big difference in how much natural gas your family consumes:
- Invest in energy efficiency. Take advantage of Alliant Energy's rebates on energy-efficient replacement windows, water heaters, programmable thermostats and more.
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Get a furnace check-up and replace the filter once a month. Keeping your system in peak operating condition means it doesn't have to work as hard. - Weatherize your doors and windows. A $50 purchase of caulk, weatherstripping and plastic film can cut heating costs by two to three times that much.
- Do a home energy audit. Alliant Energy's My Home Comfort Check Up can help you analyze your home and lifestyle, giving you a personalized report on how to save energy.
- Add more insulation to your attic. Adding 3-13 inches of insulation can cut heating costs by 20 percent.
- Seal leaky air ducts. Place your hand close to your ducts when air is flowing. If you feel a leak, seal with an approved mastic-type duct sealant or call a professional to install a sealant.
- Give your appliances a vacation. If you'll be away from home for more than a day, lower your heating thermostat to 55 degrees, and your water heater thermostat to the lowest setting.
When you're ready for more ideas , check out our 101 Easy Ways to Save Energy to cut your energy costs all year long.
Natural gas safety reminders
Trying to cut corners on energy use can sometimes lead to potential safety hazards. To avoid accidents, take a moment to review these safety reminders:
- DO have your natural gas equipment inspected by a service technician. A heating system or appliance that isn't working properly can produce deadly carbon monoxide fumes.
- DO have a carbon monoxide detector in your home, and test it monthly.
- DO have your wood-burning fireplace cleaned and inspected, and follow the operating instructions carefully.
- DON'T lower the water heater temperature to less than 120 degrees. Water temperatures below this point can cause unhealthy bacteria to develop.
- DON'T use portable heaters powered by electricity, propane or kerosene. Not only are they expensive to operate, they're also a big safety hazard.
- DON'T try to use a range or an oven as a supplementary heater, and never use a charcoal or propane grill indoors.
Learn more about natural gas safety
To learn more about natural gas prices, conserving energy and natural gas safety, download these brochures and fact sheets in Adobe Acrobat PDF format:
Taking Control of Your Energy Bill
Our handy 16-page guide - available in English and Spanish - is filled with simple energy efficiency tips and programs to help keep your energy usage in check all year long.
ENERGY STAR Home Energy Quiz
With natural gas costs at record highs, this quiz will help you find out if you're ready for winter!
PowerHouse: Heating Your Home
This brochure provides quick and easy ways to lower your heating bills, and shows you how to shop for a new energy-efficient heating system.
PowerHouse: Weatherizing Your Home
Learn how to weatherize your home inside and out with this PowerHouse: Home Comfort Tips energy guide.
PowerHouse: Insulating Your Home
Find out what R-value means and how much you need with this PowerHouse: Home Comfort Tips brochure.
PowerHouse: Natural Gas Safety
This PowerHouse: Home Comfort Tips brochure offers tips on preventing natural gas safety hazards, including gas leaks and carbon monoxide poisoning.
Do You Know What's Buried in Your Yard?
This brochure provides valuable information on staying safe around natural gas pipelines.