Well New England had a bit of a scare at the end of November when the transportation cost of natural gas spiked. While the natural gas commodity cost rose roughly 23%, from $3.00/MMBtu at the end of this past summer to the $3.30 - $3.70/MMBtu range early this winter,   the transportation of the natural gas for the Winter of 2012-2013 increased nearly 70% from roughly $1.58/MMBtu to $2.67/MMBtu. (See the side Article "Basis").  The reason for this spike is the large increase in power generation fueled by natural gas. Since 1997 the EIA reports that New England natural gas generation has increased by 144%!  

So while the demand for natural gas as increased the means to bring natural gas to our local market area has not. The Algonquin Pipeline one of two major interstate pipelines (the other is the Tennessee) that transports natural gas to southern New England typically only operates at capacity levels of 70% or more only in the coldest months. In 2012 the Algonquin pipeline was at 80% capacity nearly the entire year.

Consider how warm it was last year and yet the pipeline operated at 80% capacity. Projections released this past November for 2013 called for New England to experience a normal winter and it became clear to the market that a really cold day could create constraints in the pipeline and as a result the cost of the  transportation of natural gas popped.

The outlook for New England pipeline capacity for the next couple of years remains tight. Spectra Energy announced this past spring a plan to expand capacity on the Algonquin pipeline but the impact may not be felt until the winter of 2016-2017. For the next three year cycle the transportation of natural gas will play as critical a role in energy prices as the cost of the commodity.

Keep an Eye on the Weather

If constraints on the natural gas pipeline are a significant key to power and natural gas prices, the weather is the factor that will exacerbate any price trends. There is snow on the ground and it is cold outside as I write this but who knows how the weather will end up this winter.  Trending weather in one direction or the other will have an impact on current year prices and will be reflected future prices.

• If you are comparing a monthly price to a term price  note that as the monthly price increases so will the  term price.  The $.07/KWh  utility one month price  looks  pretty good when compared to  a supplier's $.08/KWh twelve month offer but when  the single  month utility  price does increase to  $.08/KWh the  twelve month marketer price may be  over $.085/KWh!