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EIA Sees 40% Hike in Gas Bills

EIA Sees 40% Hike in Gas Bills

Natural gas bills for residential households this winter could be as much as 40% higher than the last winter heating season, with the Midwest likely to feel the pinch the most, according to a market overview presented by the Energy Information Administration (EIA) recently.

The 40% hike in household bills is a distinct possibility if residential gas prices rise 25% or more this winter, as is expected, and winter weather conditions are normal, the Department of Energy (DOE) agency said in its "Winter Fuels Market Assessment 2000" to the Northeast-Midwest Congressional Coalition. However, if the winter is colder, then the increase in residential bills will be far greater, it noted.

The probability that the winter heating season of 2000-2001 will be "at least somewhat colder" than last winter is 95%, that it will be "10% (or more) colder" than last winter is above 50%, or that it will be "20% (or more) colder" than last winter is about 10%, according to the EIA.

With normal temperatures, there would be "broad increases" in heating demand across the North Central and Northeast regions, the agency noted, but the greatest potential for heating demand growth will be in the Midwest. Since the Midwest typically favors natural gas as a home heating fuel, this would mean that demand for gas and propane would likely "exhibit higher year-over-year growth rates than heating oil" this winter, the EIA said.

In the Midwest, the EIA forecasts that residential customers could see average burner-tip prices as high as $8.40/Mcf this winter, up from $6.61/Mcf a year ago. This would mean that the average winter gas bill for a Midwest household would total $734 this year, compared to $511 for last winter, the DOE agency noted.

Even though gas inventories are below their historical levels, the EIA seems to think there will be enough gas in storage to meet demand this winter. "We are currently projecting that working gas will be between 2,800 and 2,900 Bcf at the end of October, entering the heating season somewhat below average," it said. But if you allow for at least 800 Bcf to be in storage at the end of the heating season in March 2001, "this suggests an operational ability to withdraw 2,000 Bcf or more during the [upcoming] heating season, which exceeds the 1,876 Bcf withdrawn last winter."

As for the heating oil market, the EIA projects that Northeast residential customers will be paying higher prices this winter. "Even without particularly sharp cold weather events this winter, we think consumers are likely to see higher average heating oil prices than were seen last winter," the agency said.

It forecasts that heating oil in the Northeast will be $1.32/gal., up from $1.19/gal. last winter, assuming normal weather. Overall, the EIA estimates that the average Northeast household will pay $901 for heating oil supplies this winter, compared to $765 a year ago.

Susan Parker

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