Skip to content

Higher Natural Gas Prices = Higher Electricity Rates

The U.S. Energy Information Administration says in the December Short-Term Energy Outlook that U.S. wholesale electricity prices will be higher and more volatile this winter – from 31% higher than last winter in Texas.

Highlights from the December Short-Term Energy Outlook:

  • In 2023, U.S. natural gas production is expected to rise to an average of more than 100 billion cubic feet per day for the first time. Pipeline constraints have limited production growth in the Permian Basin of Texas and New Mexico, but the constraints are expected to be resolved more quickly than previously projected.
  • Crude oil production in Venezuela is expected to rise slightly in the second half of 2023 after the United States ruled that Chevron can resume production there. DeCarolis noted uncertainty in the production forecast for Venezuela but expected production to rise “somewhat next year.”
  • Electricity generation from wind and solar power in Texas is expected to grow in 2023. Wind power is expected to account for 29% of the state’s electricity generation in 2023, up from 25% in 2022. The share of electricity generation from solar is projected to rise to 8% in 2023, from 5% in 2022. “Renewable sources will play a key role in meeting electricity demand in Texas during peak daytime hours,” DeCarolis said.

It is expected that electricity customers in Texas will pay more for electricity, but retail electricity prices are not expected to increase as much as wholesale prices this winter. The reason is that regulatory and contractual factors vary widely across the United States. During the core winter months – December through February – EIA is forecastes residential electricity prices to average $.145/kWh, which is 6% higher than last winter.

Save on Your Electric Bill


We FORCE electricity companies to compete! Electricity providers will offer a lower price to us because they know they are competing for the business. This drives your price down!

The natural gas price at Henry Hub in 2021 averaged $3.91 per million British thermal units, with the 2022 price expected to average $6.48 per million Btu and $5.43 in 2023. In November Henry Hub averaged about $5.50 per million Btu; EIA said it is forecasting a spot price of more than $6 in the first quarter of 2023, with natural gas prices expected to increase from November levels due to higher winter natural gas demand and increasing LNG exports.

The National Oceanic and Atmospheric Administration is forecasting colder weather than last winter from October through March, with 7% more heating degree days than last winter and 2% more than the 10-year average.

EIA said it expects natural gas prices to begin to decline after January as storage levels move closer to a 5-year average but mostly a result of rising U.S. natural gas production.

The agency has raised its forecast for U.S. natural gas production by almost 1% for next year compared to its November forecast. EIA said it has expected natural gas production from the Permian basin to be limited early next year by lack of pipeline capacity but now expects those constraints to be resolved earlier than previously thought.

U.S. natural gas production is forecast to average 98.1 billion cubic feet per day this year, and in November EIA forecast an average of 99.7 bcf per day for next year, a forecast it has now raised to 100.4 bcf per day.

Production of more than 100 bcf per day in October and November exceeded pre-pandemic monthly records from 2019, EIA said, with growth in natural gas production driven by increased drilling activity in the Haynesville region in Louisiana and East Texas and in the Permian region in West Texas and Southeast New Mexico. “Recent pipeline infrastructure expansions in both these regions facilitated the increases in production,” EIA said.

The agency said forecast production in the first half of 2023 is limited by pipeline constraints and declining prices, with more pipeline infrastructure expansion projects scheduled to come online in the second half of the year, contributing to increases in dry natural gas production. “The pace at which these projects are completed is a notable uncertainty in our forecast, and delays could result in lower production than we expect,” EIA said.

U.S. natural gas exports are forecast to increase in 2023, “driven largely by growth in LNG exports,” EIA said. Those exports peaked in the first half of 2022 with facilities operating close to maximum capacity and the Calcasieu Pass facility coming online.

A June fire at Freeport LNG, however, removed some 2 billion cubic feet per day of U.S. LNG export capacity. Freeport has announced it plans to come back online in December and increase output to some 2 bcf per day in January.

Once Freeport is back online, EIA said it is forecasting that LNG exports will set a new record, close to 12.5 bcf per day, in March, with U.S. LNG exports expected to reach 12.7 bcf per day by the end of 2023.

No new U.S. LNG facilities are scheduled to come online in 2023, EIA said, and it is forecasting LNG exports in 2023 to average 12.3 bcf per day as facilities continue to operate close to maximum capacity to meet high demand for natural gas in Europe and Asia.

The U.S. also exports natural gas by pipeline to Canada and Mexico and those exports reached almost 9 bcf per day in November, EIA said, near a previous record. During the coming winter months pipeline exports are expected to be between 9 bcf and 10 bcf a day, reaching new record highs.

EIA said Brent averaged $91 per barrel in November, up from an average of $70.89 per barrel in 2021. The agency is forecasting a 2022 average of $101.48 per barrel and $92.36 per barrel in 2023.

In November Brent reach almost $100 per barrel on Nov. 7, dropping by the end of the month to $86 per barrel. “The price declines were largely the result of market concerns about global economic growth, as well as COVID-related lockdowns in China that have reduced China’s oil demand,” EIA said, adding that despite the recent drop in prices, it expects Brent to be pushed back above $90 per barrel by the beginning of the second quarter on falling global inventories.

EIA said because global petroleum inventories are relatively low and it takes time to rebuild those inventories, the market has limited slack during the forecast period, and any unplanned supply disruption has the potential to increase oil prices quickly and significantly.

Ways to Lower Your Electricity Bill