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Rate Hike Frenzy Takes Place Nationwide

Rate Hike Frenzy Takes Place Nationwide

From coast to coast, utilities and local distribution companies (LDCs) are preparing for the peak natural gas-usage season this winter by filing rate hikes with regulators, and bracing their customers for inflated gas prices that are still to come.

"Soaring prices" and "lower than normal storage" were phrases that were sounded repeatedly at the Governors' Natural Gas Summit last week in which governors, industry experts and other participants gathered in Ohio to discuss strategies and alert customers of what is to come this winter.

"We want Ohioans and all Americans to be prepared," said Bob Taft, governor of Ohio. "Our first step is to help consumers, both residential and industrial, develop strategies to address the rising natural gas costs we will face this winter. It is critical that states take the lead in making sure our low and fixed-income citizens are assured of affordable supplies to heat their homes in the winter months. Today's summit also served as an excellent opportunity to educate decision makers and to starting developing strategies to expand the natural gas supply here in Ohio and across the country."

With historically low gas storage levels and wholesale prices already at record highs, home and business owners from Rhode Island to Oregon are being advised by their respective suppliers of just what's in store when the mercury drops.

"We do not want consumers to be surprised by higher natural gas bills this winter," said Ken Lawrence, president, PECO Energy. "Energy prices are up significantly across the country. This is a national phenomenon not unique to PECO, or natural gas."

Effective on the first of this month, the rate which was submitted to the Pennsylvania Public Utility Commission for PECO's suburban natural gas customers rose 6.5%, from 71.8 to 76 cents per ccf. PECO plans on raising its rate again come Dec. 1, to 85 or 90 cents per ccf based on continued higher wholesale prices. PECO's Pennsylvania residential customers who paid $136 for a month's usage of 200 ccf last year, will pay about $172 a month this year.

"The high prices should be temporary, but the period of time is uncertain. That will depend on how cold it is this winter and demand over the long term. The critical point for consumers this year is the higher prices coupled with the expectation of a colder winter will affect all of us."

PECO, however, is not the only company firing the emergency flare into the sky. The Rhode Island Public Utilities Commission will hear Providence Gas' rate hike case on Sept. 27. Providence Gas is filing for an increase of $2.18 per Mcf to be effective Oct. 1, which will boost Rhode Islanders' average annual bill by approximately $237, or 22.4%.

Unitil/Fitchburg Gas and Electric (FG&E), a gas and electric retail distributor, has likewise filed with the Massachusetts Department of Energy and Telecommunications seeking an 11.5% increase on gas over last winter's rates. A typical FG&E residential customer using 146 therms of gas per month can expect an increase of $14.11 on their bill if the department approves it.

Central Illinois Light Co. (CILCO) is another example. CILCO began a campaign entitled Operation Energy Smart to prepare its customers for gas prices it said would be "at least 50% higher" than last winter. The program is attempting to teach customers energy saving tips, and inform them of billing plans, which might be helpful. "We don't want anyone to be surprised when cold weather arrives," said Neal Johnson, CILCO legislative & public affairs representative. "For the last three years natural gas prices have been stable. But natural gas is a commodity and as such it is subject to the fluctuations of the market's supply and demand."

Cleveland-based Dominion East Ohio filed last Friday with the Public Utility Commission of Ohio to increase its rate from $6.15 to $7.18 per Mcf. Based on this new rate increase which will be effective in late October, residential customers can expect to pay $70 more per month during November, December and January, when compared to a year ago.

"Despite significant national market price increases, our company has continued purchasing and injecting natural gas into our storage fields, as scheduled, to ensure that we'll have sufficient supplies to serve our customers this winter," noted Edgar M. Roach, Dominion East Ohio CEO.

Xcel Energy's Public Service Co. of Colorado last week filed a gas cost adjustment with the Colorado Public Utilities Commission seeking a $126.2 million annual increase for natural gas costs. If approved, the increase since Oct. 1999 would be $28.75 or 39.6% per month for residential customers and $146.16 or 48.6% per month for commercial customers. "While everyone seems to notice the high cost of gasoline at the pump, many of our customers are not aware that natural gas prices in the marketplace have climbed to unprecedented heights," said Cynthia Evans, Xcel Energy's vice president for Colorado, Wyoming and Arizona.

"If they haven't already, now is the time for our customers to consider things they might do to reduce their natural gas consumption this winter," said Evans. "There are many private contractors in the area that provide home energy audits and weatherization programs."

This small sample of the nation's utilities and LDCs ends in Oregon, where Portland-based Northwest Natural Gas filed last month with the Oregon Public Utility Commission to increase its rate by 24% due to the rise in price of gas. The company said increased use of natural gas to power electricity generating plants has made demand outweigh the available supply. Northwest is offering its customers different pay programs to help ease the inflated cost of gas.

CILCO's Johnson summed up the problem, "The cost of natural gas was cheap for so long, they [exploration & production] really were not doing any exploration or putting anymore rigs in the ground..... There [also] have been a lot of conversions over to natural gas because it is still a better bargain. All these additional market demands increased, and the supply hadn't. Now we are seeing more exploration and drill rigs being put into the ground to explore and expand the supply, but there is usually a six to seven month lag before you will see any price relief at the wellhead. That's not going to do our customers any good during the heating season."

Alex Steis

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