New Yorkers to see lower power bills as oil slump caps gas costs

New York City households and businesses are poised to see lower utility bills as the plunge in oil prices reduces fuel costs for some generators.

Wholesale power for delivery to the city in January, when heating demand is highest, has tumbled 23 percent over the past six weeks. Crude has dropped by half since June amid a global supply glut, pulling down the cost of fuel oil used in some power plants. At the same time, record production and mild weather sent natural gas futures to a two-year low Monday.

Oil is becoming more competitive with gas at plants that can burn either, which may pressure gas and power prices, said Kate Trischitta, director of trading at Consolidated Edison Inc.'s wholesale power unit. "It's great for the consumer; it means lower electricity prices across the board."

The Northeast grid has offered incentives for plants to stockpile fuel, helping to reduce volatility in a region that saw record gas prices the previous winter because of pipeline constraints and frigid weather.

"Oil's come down enough that it's more apt to give you a cap on where the gas prices can go — in the areas that you still have a lot of oil-burning capability which, really, is kind of just downstate New York," said Trischitta in an interview in New York. "That's fairly new, while we've been seeing the Henry Hub come off for quite some time."

About 79 percent of New York City's generating capacity can swap between two difference sources of fuel versus 47 percent across the state, Con Edison said in a Sept. 17 presentation using data from the New York Independent System Operator Inc.

Gas delivered for January at the Iroquois Zone 2 just outside of New York City fell $2.279, or 19 percent, Wednesday to $9.622 per million Btu at 12:57 p.m., according to the Bloomberg Fair Value Index. That compares with about $9.45 for 0.3 percent sulfur fuel oil.

"Every winter, you will have a week or two of extreme weather," Trischitta said. "Last year, what we had was it just never ended. It went on and on."

This December is on track to be 15 percent warmer than last year, with the number of heating degree days, a proxy for weather-driven energy demand, dropping to 777 from 909.5, Matt Rogers, president of Commodity Weather Group in Bethesda, Maryland, said in an email. The previous December through February were the coldest for those months in 32 years, he said.

The milder weather this month has slowed the pace of gas withdrawals from storage caverns in the lower 48 states, eliminating a supply deficit versus year-earlier levels that had emerged in December 2012, U.S. Energy Information Administration data show.

Stockpiles fell by 115 billion cubic feet during the first two reports released in December, compared with a year-earlier draw of 366 billion for the same period, according to the EIA. Supplies totaled 3.295 trillion cubic feet on Dec. 12, a surplus of 0.2 percent versus the same time last year.

"From a supply perspective we're in fairly good shape compared to where we stood last year," said Lopez. "Now all we have to avoid is zero-degree temperatures for weeks."