US Natural Gas Prices: The Henry Hub spot price averaged $4.25 per MMBtu during December, an increase of about 54 cents form November's price of $3.71 per MMBtu. EIA expects the higher forecast production during the first half of 2011 compared with the same period last year, combined with a decline in consumption, to moderate natural gas spot prices. The projected spot price falls to a low of $3.73 per MMBtu in June then rises to $4.61 in December, averaging $4.02 per MMBtu for all 2011, which is $0.37 per MMBtu lower than the 2010 average and $0.31 per MMBtu lower than previous forecast. In 2012, the spot price rises to an average of $4.50 per MMBtu.

Uncertainty over future natural gas prices is slightly lower this year compared with last year at this time. Natural gas futures for March 2011 delivery (for the 5-day period ending January 6) averaged $4.39 per MMBtu, and the average implied volatility over the same period was 43 percent. This produced lower and upper bounds for the 95-percent confidence interval for March 2011 contracts of $3.21 per MMBtu and $6.02 per MMBtu, respectively. At this time last year, the natural gas March 2010 futures contract averaged $5.73 per MMBtu and implied volatility averaged 57 percent. The corresponding lower and upper limits of the 95-percent confidence interval were $3.88 per MMBtu and $8.47 per MMBtu.

US Electricity Retail Prices: EIA expects the US retail price for electricity distributed to the residential sector during 2010 to average 11.6 cents per kilowatt-hour, about the same level as in 2009. EIA expects the US residential price to increase only slightly over the forecast period--by 0.6 percent in 2011 and by 1.0 percent in 2012.