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Mild Winter Weather Drives Down PG&E February Gas Prices 31%

Warmer-than-normal weather since the early December freeze across much of the nation has caused wholesale natural gas prices for February to drop 31% from last month's levels for Pacific Gas and Electric Co. The San Francisco-based utility said there has been a "significant drop" in heating demand nationwide, and in California the utility's more than four million natural gas customers "appear to be conserving above and beyond the dictates of weather."

Costs are down nearly 30% from January to February ($1.268/th vs. 89 cents/th in February), the PG&E utility reported in its monthly "Natural Gas Watch." Prices are still 32.6% above those in February last year (67.1 cents/th).

"After factoring in weather, PG&E's customers used less natural gas during November and December, compared with the same period in 2004," the utility announcement said. Nevertheless, it pointed out that natural gas bills "will remain higher" than February of last year, reflecting the national market taking a longer-term outlook on tight supplies.

As a result, PG&E's utility said natural gas bills for its residential customers will be 23.3% higher this month than they were a year earlier. Average gas bills will be $107.44/month, compared with last month's average PG&E residential customer bill of $156.42.

"The decrease in demand and milder weather has resulted in a sharp decline in both spot and forward prices of natural gas," the Gas Watch report said. "Because of the warmer temperatures and drop in demand, storage facilities continue to have enough gas supply for PG&E's residential customers throughout the winter season.

"When prices peaked in mid-December, there was uncertainty about supplies for the entire nation. However, storage levels on the West Coast are currently well above the previous five-year high for this time of year. Despite the decline in natural gas prices and ample storage outlook, a cold snap could still impact this volatile market."

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