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TRC Commissioner Issues Gas Price Warning

TRC Commissioner Issues Gas Price Warning

Texas Railroad Commissioner Tony Garza warned the state legislature and the Texas Congressional delegation last week of an expected 55% increase in natural gas prices this winter for small customers and the expected continuation of high prices for the next year to 18 months.

"With respect to supply, we do not anticipate that there will be widespread interruptions of deliveries over the winter," Garza told Lt. Gov. Rick Perry in a letter. "However, with a tight market, it is possible that customers other than residential and commercial customers could experience some short-term reductions in their deliveries. There should not be any disruption in meeting consumer needs, barring, of course, any major mechanical failures in the delivery system. I will keep you informed of any significant change in the price or supply outlook."

Garza said increasing gas demand for power generation and the impact of low prices 18 months ago on production have led to the current high-price situation. "Based on information presented at last week's meeting of natural gas suppliers, consumers, and regulators [at the Interstate Oil and Gas Compact Commission summit in Ohio], it appears that higher natural gas prices are expected to persist nationwide for at least the next 12 to 18 months."

"If the current spot price of natural gas remains at $5.00 per Mcf compared to an average wellhead price last winter of $2.45 per Mcf, then the typical homeowner using 10 Mcf per month would be facing an increase in heating costs of about 55% assuming that his consumption over the winter stays flat," he said. "A colder winter with more usage would obviously compound the increase in total cost to the consumer."

Rocco Canonica

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