Hedging programs promise protection against energy-market price spikes, and they can be important to the regulatory goal of sustainable, lowest long-term service cost. But how much price...
Northeast Energy Markets: Windfall or Washout?
feet (MMcf) per day, greater. Since both oil and gas demands are influenced by weather, this decline in share is not explained much, if at all, by the warmer weather in 1997 and 1998.
Natural gas accounts for less than 50 percent of the combined distillate oil/natural gas residential market in practically every Northeastern state except New York.[Fn.6] Although the trend of decline should be unsettling to the gas industry, the low percentages, especially when compared to the overall average natural gas share of about 88 percent for the rest of the United States, provide some idea of the potential for growth in this region. If the share grew to 88 percent in the region, then regional demand would increase by about 300 Bcf, or about 800 MMcf per day.
Part of the gain in market share by oil in recent years is due to price. Computing the fuel oil price relative to the natural gas price (see last column of Table 2) is a way of assigning a competitive score to gas distributors in the Northeast. Examination of these scores with 1998 data reveals that gas distributors in most states received a score equivalent to a letter grade of D. Only Maine and Vermont had a score of B or higher.
According to 1998 statistics from the U.S. Energy Information Administration (EIA), the difference between the prices distribution companies and heating oil dealers offered residential customers is a huge $3.00 per million British thermal units (Btu) in such states as Connecticut, Rhode Island and Massachusetts. The majority of consumers pay 40 percent more than the national average natural gas price of $6.49.
Power Demand: Depressed by High Prices
Residential customers in the Northeast not only pay much more for natural gas than the average customer in the remainder of the United States, but they also pay much more for power - 73 percent more in New York. In particular, customers in New York pay almost 6 percent of the revenues received by electric utilities from residential customers in the United States, yet they receive only 3.5 percent of the generated power. Not too surprisingly, electricity sales per residential customer also generally are much less in the Northeast than they are in other areas of the country. Accordingly, generation capacity per capita and use per customer are both low because prices are high. Thus, low figures for generation per capita in the Northeast do not necessarily indicate a lack of generation, as it might appear.[Fn.7]
External Factors: Slow Growth Continues
for Population and Regional Economy
About one-third of the counties in New York experienced a decline in population between 1990 and 1998. Counties in the other Northeastern states also experienced declines.[Fn.8] More recently, the population of the United States increased by almost 1 percent between 1997 and 1998. The only state in the Northeast that exceeded this national average was New Hampshire. Massachusetts and Vermont were next in growth, with 0.5 percent and 0.4 percent growth, respectively. The remaining states had a gain of less than a quarter of the national average.