Munis Urge DOE, FERC to Probe High Prices
Just as the Department of Energy (DOE) reacted to public outcry
over high oil and gasoline prices, Energy Secretary Bill Richardson
and FERC need to find out why wholesale natural gas prices have
soared to more than $4 since the start of the year and prepare
customers for possibly higher gas bills next winter, a major
municipal gas group said last week.
If they don't, the group warned the public's reaction will be
deafening when the wild wholesale price fluctuations are reflected
in gas bills next fall and winter.
"...[I]n light of clear warning signs of higher prices ahead for
natural gas consumers, we believe that the Department of Energy and
the Federal Energy Regulatory Commission have a duty to determine
why natural gas prices are at all-time highs and to consider the
policy implications of such analysis," wrote Leslie B. Enoch II,
president of the American Public Gas Association (APGA) and CEO of
the Middle Tennessee Gas Utility District, in a letter that was
delivered to Richardson and FERC Chairman James Hoecker last
"For the first time in its history, a Nymex contract recently
closed above the $4.40/MMBtu level. This is noteworthy not only
because the price for natural gas is at the highest level ever for
this time of year, but also because these are the highest monthly
prices for natural gas experienced since deregulation in the
1980s," he said.
"We realize that many factors impact natural gas prices, and
that absent market distortions, the marketplace will usually
determine the proper price. However, the cause for the extreme 100%
increase in just five months should raise concerns with regulators
and policy makers in Washington," Enoch noted.
"Wholesale natural gas prices above the $4 level will cause
significant economic harm to the American consumer.....APGA is very
concerned for the citizens of the communities we serve. When the
bills reflecting current gas prices are received by our customers
(especially if such prices do not abate by winter), I expect the
fallout will extend far beyond the local communities we serve," he
told the two agencies. Enoch fears that homeowners' heating bills
for next fall and winter could be double that of last winter.
Enoch believes the agencies especially should look at the
"energy policy considerations" of using more and more gas to fuel
power generation. They need to determine whether this is the "best,
efficient use of a limited resource. We need to get back to some
reasonable [wholesale price] levels," such as $2.20, he said. "What
real benefit is it [gas-fired generation]," he asked, when
traditional gas users are forced to pay the price for it.
The DOE has begun to take some steps. Last week, DOE officials
met with a number of gas representatives in St. Louis, MO, to
address the issue of increased summer demand and the industry's
ability to meet it.
APGA Executive Director Bob Cave conceded he wasn't "really
sure" there was anything DOE or FERC could --- or would --- do to
quickly tame the wild wholesale gas prices. But he agreed there
were a number of policy issues --- such as supply availability,
storage and the increased use of gas by electric generation - "that
can be looked at and evaluated" prior to winter.
"If we're going to be looking at high rates next winter, we want
to be prepared and inform our customers in advance," Cave said. The
APGA represents more than 480 municipal and other publicly owned
gas distribution systems nationwide, which primarily cater to
commercial and residential customers.
Unlike with oil, where higher prices translate almost
immediately into higher gasoline prices for customers to see at the
pump, natural gas has a much longer lead time between wholesale
price increases and their impact on residential customers, he