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Munis Urge DOE, FERC to Probe High Prices

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 Thursday.

"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 noted.

Susan Parker

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