For the first eleven months of 2013, natural gas consumption in the electric power sector was below 2012 levels because of relatively higher natural gas prices compared with coal prices, and cooler summer weather compared with 2012. EIA estimates that electric power sector natural gas consumption was, on average, down by 13% so far in 2013 (through November), relative to the same time period in 2012. By contrast, industrial sector natural gas consumption in 2013 was up 3% compared with 2012.

Changes in electric power sector consumption of natural gas are primarily attributable to commodity prices. For the first eleven months of 2012, the benchmark natural gas spot price at Henry Hub averaged $2.70/MMBtu. For the same months in 2013, the average Henry Hub price was $3.68/MMBtu, somewhat higher than the previous year\’s levels, lowering electric-sector demand for natural gas. Accordingly, natural gas lost some of its electric-sector market share to coal in 2013, but it is still being consumed at rates generally above the 2007-2011 range. Electric power plants are dispatched, or called into service, based on their variable cost of operation, which is determined by both the price of the power plant\’s fuel and the efficiency of the plant.

Because natural gas and coal are the primary fuels used to generate electricity in the United States, the decline in gas prices delivered to electricity generators (from an average level of $8.87/MMBtu in 2008 to $3.43/MMBtu in 2012 and $4.37/MMBtu for the first eleven months of 2013) and the increased role of natural gas in electric generation are applying downward pressure on coal prices.

via Natural gas use for power generation falls as industrial sector’s use continues to rise – Today in Energy – U.S. Energy Information Administration (EIA).