The boom in US natural gas production has far outpaced construction of infrastructure necessary to get the fuel to key end-markets. And that has significant implications for producers.

It also means higher electricity bills for electricity customers in particularly infrastructure-poor regions such as the US Northeast and New England.

The National Oceanic and Atmospheric Administration (NOAA) has forecast relatively mild temperatures in the Northeast and New England for the November-December-January period, though conditions cool off closer to normal temperatures compared to the 1981-to-2010 reference period during December-January-February.

Nevertheless, a Sept. 25, 2014, BostonGlobe.com headline warned Electric Rates in Massachusetts Set to Spike This Winter due to “a persistent shortage of natural gas for generating plants.”

On Sept. 24 National Grid Plc (London: NG/, NYSE: NGG) warned its Bay State customers  that electricity rates will be going up this winter, with a typical customer paying 37 percent more than last year for the same amount of power consumed.

The Massachusetts Department of Public Utilities (DPU) approved a rate increase for National Grid that will raise household customers’ bills by an average of $33. Large business customers will see even steeper increases. 

At the same time, National Grid said natural gas customers would see a small decrease in their bills, mostly due to credits based on last year’s usage.

The shift in New England’s power generation mix to gas, driven by the planned retirement of approximately 3 gigawatts of coal, oil and nuclear generation over the next three years, requires new supply.

But the major issue confronting the market–at least as it relates to the fuel’s use in electricity generation–is takeaway capacity.

Gas prices in New England peaked at $82 per million British thermal units (MMBtu) on Jan. 22, 2014, and averaged $28 per MMBtu for that month, a 153 percent year-over-year increase.

New England wholesale electricity costs were nearly double compared to the previous year, largely due to pipeline constraints.

Natural gas in storage rose to 3.1 trillion cubic feet (Tcf) during the week ended Sept. 26, 2014, according to the US Energy Information Administration (EIA) Weekly Natural Gas Storage Report.

That’s a net increase of 112 billion cubic feet (Bcf) for the week. Analysts were expecting an average build of 107 Bcf.

But storage levels are still 10.7 percent below year-ago levels and 11.4 percent below the five-year average for this week.

There are five more weeks in the injection season, which traditionally occurs April 1 through October 31, although in each of the past 11 years, injections continued into November.

In six of those years, there have been multiple weeks of net injections. There have also been multiple weeks within the injection season when the weekly change resulted in a net withdrawal.

As of Oct. 2, EIA forecasts that the end-of-October working natural gas inventory level will be 3.477 Bcf, which as of Sept. 2 required an average injection of 75 Bcf per week through the end of October.

EIA’s forecast for the end-of-October inventory levels are below the five-year (2009-13) average peak storage value of 3.851 Tcf.

The Sept. 26 injection data are a good start, but it seems we’ll be heading into the withdrawal season with a fairly significant deficit compared to storage levels ahead of the brutal winter of 2013-14.

That portends another winter spike in electricity rates for regions such as New England.

Despite the fact that US natural gas production continues to grow, output is nowhere near what it could be because producers are restraining activity in key basins such as the Marcellus and the Utica shales.

Chesapeake Energy Corp (NYSE: CHK), for example, isn’t spending a lot of money on its otherwise prolific Marcellus North flat, despite the fact that it’s seeing “absolutely phenomenal” rates of return.

The limiting factor is the absence of takeaway pipeline capacity. This, rather than drilling economics, will be the key determining factor for natural gas prices in the near term.

Chesapeake remains highly leveraged to key US shale plays. But the lack of takeaway capacity for the production from those plays is weighing heavily on the share price, which hit a 52-week low on Oct. 2.

The November natural gas futures contract traded on the New York Mercantile Exchange (NYMEX) initially slumped on Oct. 2 on release of EIA storage data but spiked by more than 1 percent on Oct. 3, as the implications of a withdrawal-season deficit took root.

About half of New England’s power is generated by natural gas and constrained pipelines mean ratepayers will feel the pinch this winter. Generators are turning to the gas spot market during peak times and “with the chance of another cold winter on the way, National Grid is very concerned about what higher energy costs mean for our customers.”

Northeast Utilities’ (NYSE: NU) NStar unit is also looking closely at what it will cost to supply power, though the utility has yet to make a final rate filing.

Northeast Utilities, along with pipeline operator Spectra Energy Corp (NYSE: SE), recently announced a plan to accelerate infrastructure investment to deliver new gas production to New England, laying the foundation for more reliable and cheaper service.

The two Utility Forecaster Portfolio Holdings have proposed a $3 billion plan to develop the Access Northeast natural gas pipeline.

The project, which will supply fuel for power plants and home heating, would go a long way toward easing gas supply constraints and reliability issues in New England.

It will entail an expansion of existing pipeline infrastructure, partnering with existing storage facilities to provide firm services to generators and the addition of local distribution company delivery points.

Spectra, which will build Access Northeast, joins competitors Kinder Morgan Energy Partners LP (NYSE: KMP) and EQT Corp (NYSE: EQT) in the race to expand links from the Marcellus Shale to East Coast customers.

Several gas pipeline expansion projects–including two others involving Spectra, Algonquin

Incremental Market and Atlantic Bridge–are in various stages of planning.

Access Northeast will boost capacity on Spectra’s Algonquin and Maritimes pipelines by as much as 1 billion cubic feet a day. The expansion project may have an edge over Kinder Morgan’s proposed Northeast Energy Direct project because Spectra plans to use existing routes.

Assuming all necessary approvals are granted, construction on Access Northeast will begin in 2016, with a projected in-service date of November 2018.

It won’t help Massachusetts households’ abilities to just make ends meet this winter. But it’s an important piece of the energy infrastructure puzzle.

Fed Watch

According to the US Dept of Labor’s Bureau of Labor Statistics, the US added 248,000 jobs in September, and hiring in August turned out to be a lot stronger than initially reported.

The unemployment rate also fell to a six-year low of 5.9 percent, dropping below the 6 percent mark for the first time since 2008.

Much of the decline in the unemployment rate was due to the increase in jobs. But it was also helped by a 97,000 decline in the labor force that took the participation rate down to 62.7 percent, a new low since the late 1970s.

As we note in the October 2014 Utility Forecaster feature article, the aging of the Baby Boomers will keep putting downward pressure on the labor-force participation rate.

Analysts expected an increase of 220,000 non-farm jobs.

Growth was solid across all sectors, including professional jobs, retailers, health-care and construction.

Average hours worked each week rose a tick to 34.6, a post-recession high.

That slight gain in hours per worker might not seem like much, but each 0.1 hour is the equivalent of about 340,000 jobs.

As a result of both payroll gains and more hours per worker, the total number of hours worked increased 0.5 percent in September and is up 2.6 percent in the past year.

Average hourly wages fell a penny to $24.53, reducing the 12-month increase to 2 percent from 2.1 percent. But total cash earnings are up 4.6 percent year over year, which means growing purchasing power for consumers. 

Job gains for August and July, meanwhile, were revised up by a combined 69,000. The BLS reported that 180,000 new jobs were created in August, up from a preliminary estimate of 142,000. July’s gain was revised to 243,000 from 212,000.

The non-farm payrolls report is a widely watched but highly volatile data series, so longer-term trends provide more useful insight than the initial monthly estimates.

So far in 2014 the economy has gained an average of 227,000 jobs a month, up 17 percent from the 2013 pace of 194,000.

There are potential implications here as far as the US Federal Reserve is concerned.

The labor market is clearly getting better: more jobs created, more hours worked, total pay is up year over year. 

Slow wage growth remains a constraint on economic growth, despite signs of progress on other fronts. But with falling unemployment and a low participation rate, wage growth should start to pick up as well.

News like this may prompt the Federal Open Market Committee to alter its “significant underutilization of labor market resources” phrasing in its October policy statement. We still expect the Fed to make its first rate hike in mid-2015.

But interest rates won’t move all that far all that fast.