Shale gas will support inexpensive electricity

November 30, 2013

As stated in the “Natural gas dilemma” article [Nov. 18], there is increased demand for natural gas in the electric energy market in Indiana and across the country. However, I take exception to the theme that this increased demand will drive volatility in the market and harm Hoosier electric and gas customers.

As we previously announced, Vectren’s winter gas bills for central Indiana will be slightly higher than last year, but remain near historic lows. Local distribution companies like Vectren simply deliver the gas to homes and businesses at the price paid. State law prohibits utilities from making a profit on the commodity price.

In fact, gas prices are so attractive, we received approval to purchase some hedged gas well into the future, locking in a portion of our supply up to 10 years out at prices around $4 to $4.70 per unit. Our purchasing strategy has always been about making sure customers have a reasonable-cost supply.

Shale gas, known as the “game changer” of the energy industry, is now being produced in 32 states. It has helped put domestic gas supply at levels not seen since 1971.

According to a May 2013 Energy Information Administration report, shale gas development will go from between 30 percent and 35 percent of U.S. gas supply to 50 percent by 2040. This abundant supply was the catalyst for the substantial dip in market prices between 2008 and 2009, and the certainty of shale gas for decades to come is the reason market volatility has mitigated substantially.

According to the same report, domestic natural gas production is growing faster than consumption, and the U.S. will become a net exporter of natural gas around 2020.

Our nation’s strong natural gas supply fundamentals and robust and reliable natural gas delivery infrastructure suggest that through the next decade and beyond, a range of demand scenarios can be met by a diverse and responsive supply market within an estimated price band of $4 to $6.50 per MMBtu in today’s dollars—a level well below the peak market prices of the preceding decade.

The short- and long-term outlook for the supply and price of natural gas remains extremely positive for the U.S. It is important we continue supporting policies for responsible fracking and put this domestic source of energy to use for all customers.

Carl Chapman
CEO, Vectren Corp.

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