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Amid natural gas glut, NStar seeks rate cut

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The boom in domestic natural gas production is leading local utilities to seek the lowest winter gas rates in a decade, even as heating oil prices have climbed.

The Boston utility NStar on Tuesday asked state regulators to approve an 18 percent decrease in its gas supply rate, estimating the utility’s typical customer would save more than $15 a month, compared with last year. If the new rate is approved, the average customer would cut monthly winter heating bills to $145.60, down from $161.25 last winter.

In Massachusetts, about 44 percent of households heat with natural gas, while 39 percent are warmed by more expensive heating oil, according to the US Energy Department. Average heating oil prices in Massachusetts are up 3 percent from a year ago, according the most recent state survey, conducted last week.

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Natural gas prices have declined in the last few years as a controversial drilling process called hydraulic fracturing, or fracking, has made it easier to access natural gas trapped in large shale formations in states like Pennsylvania.

Even as debates about fracking’s effect on the environment and drinking water supplies rage, consumers in New England and across the nation have benefited from increased North American natural gas supplies. The price of natural gas in commodity markets — which helps to determine what consumers pay — has fallen nearly 79 percent, from $13.31 per million British thermal units in July 2008 to $2.82 last week.

Phil Flynn, an energy market analyst with Price Futures Group in Chicago, said he expects the plentiful supplies of natural gas to keep prices depressed over the long run.

“I think we’re in a new era of lower natural gas prices,” Flynn said.

But crude oil prices, which drive heating oil costs, should resume their rise and eventually top $100 a barrel, Flynn said.

Global demand and worries that unrest in the Middle East could disrupt global supplies have pushed crude prices higher in recent months.

Crude closed Tuesday in New York at $95.29, down a $1.33 from Monday.

The higher costs of heating oil have led more Massachusetts residents to convert heating systems to natural gas, utilities say. When the two fuels are compared based on their energy output, natural gas would cost the equivalent of about $1.50 a gallon, compared with about $3.75 a gallon for heating oil, said James Daly, vice president of energy supply at Northeast Utilities, NStar’s parent company.

In 2011 alone, NStar had 2,020 conversions, up from 867 in 2010, Daly said. The utility projects 3,500 conversions this year.

“We’re at an all-time high in terms of conversions,” Daly said.

National Grid is also expecting an increase in the number of conversions — almost 8,000 this year compared to 6,400 in 2011, said spokeswoman Deborah Drew.

The utility also has requested a decrease in natural gas rates. If they are approved, National Grid’s gas supply rate would drop nearly a dime per therm, from 72 cents to 63 cents. Even so, with other charges on customers’ bills changing, National Grid’s typical gas customer will probably see the monthly utility bill remain relatively flat this winter, compared with last year.

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