Panel: Political forces interfering with ability of natural gas market

While the price volatility of natural gas is expected to continue in the near future, a panel of experts gathered at the annual National Association of Regulatory Utility Commissioners (NARUC) summer meeting warned that political forces are also interfering with the market.

“Looking a few years down the road, we’re going to see levels of price volatility that we’ve never previously seen in the U.S. market,” Andy Weissman, CEO of EBW Analytics Group, said. “I think we’re going to see continued price volatility because of one of two factors — one being the volatility of natural gas demand from one year to the next and the second being the practical, real-time limitations of the industry to just turn on a spigot to adjust for changes in energy demand.

“For instance, if we have another warm winter in the U.S. and the northern hemisphere, we’re likely to see low amounts of exports and power sector demand for natural gas. If the next year turned out to be much colder, the industry could face great difficultly in keeping up with the rising demand.”

The panel, which also included Dianne Solomon, commissioner to the board of New Jersey Public Utilities; Stan Wise, commissioner of the Georgia Public Service Commission; Pam Witmer, vice president of government affairs at UGI Energy Services; Julian Dumoulin-Smith, executive director of US Electric Utilities, Alt Energy and IPPs Group, and UBS Investment Research; and Paul DeCotis, senior director of energy and utilities practice at WestMonroe Partners, LLC, agreed that politicians must do more to help the industry deliver its product to market without being forced to rely on second and third choice options.

Witmer pointed to a recent veto of the PennEast pipeline by New York Gov. Andrew Cuomo as a concern. Cuomo cited environmental concerns in his veto, which led UGI Corp. to explore alternatives, including horizontal directional drilling under bodies of water.

UGI did see success with its Auburn pipeline, Witmer said. The Auburn pipeline began operations in January, and UGI has received approval from the Federal Energy Regulatory Commission for its Sunbury pipeline, which is set to be completed in November.

“It really is incumbent on regulators and government officials to make sure that the systems remain reliable,” DeCotis said. “Yet year after year in some regions of the country, in particular the northeast, natural gas pipeline capacities are insufficient. We don’t have a gas supply problem (to the afflicted areas), we has a gas deliverability problem. If we can’t get the gas to place that need it most, it’s only a matter of time before the gas markets constrict.”

DeCotis added that one-third of natural gas production is used by residential customers, with 24 percent used by industrial customers and 22 percent used for electric generation. The remaining supply is spread across a variety of sectors.

“Nuclear generation isn’t going to be a bridge to a renewable future,” DeCotis said. “But natural gas sure will be.”