New England natural gas prices have been trading near record discounts to Henry Hub

Natural gas has gotten notably cheap in New England this year. From April through July, prices at Algonquin Citygate (a major regional pricing point) averaged 43 cents per million British thermal units below Henry Hub, the U.S. benchmark price. That's the second-largest discount recorded for this stretch of the year going back to 1999. The main reasons: cheap gas flowing in from Appalachia and Canada, plus lower regional demand.

Two supply trends are driving the discount. Appalachian gas, which now makes up 31% of U.S. production, is arriving in New England through pipeline connections at a steep discount to Henry Hub. At the same time, natural gas imports from Canada hit a record high, averaging 0.4 billion cubic feet per day from April through July, more than two and a half times last year's volume for the same months.

Demand also dropped. Total gas consumption in New England fell 5% compared with the same period last year, partly because power plants burned 6% less gas for electricity generation. Wind power output rose 59% and solar rose 29% over the same stretch, displacing some gas-fired generation. For homeowners, cheaper wholesale gas and more regional supply don't guarantee lower retail heating bills, since utility rates depend on many other factors, but the trend points to looser, more competitive gas markets in the region for now.