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Storm Clouds Will Form Over Consumers' Winter Heating Bills

December 5, 2005
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While the 26th named tropical storm this year is raging far out in the Atlantic, the natural gas industry needs to look out for the 27th blast of turbulence, which will hit when consumers get their first big heating bills of the season, according to Stephen E. Ewing, vice chairman of DTE Energy. "We're in the calm before the storm," and face a "turbulent future marked by unprecedented high prices."

"We need to get really serious about improving supply," Ewing, who also is chairman-elect of the American Gas Association (AGA), told reporters in Washington. "The 27th storm is on the way." And it will "send shock waves through lots of households," not just the poor, but also in the unsuspecting middle class. Many who had been self sufficient could be pushed into needing assistance.

The shock will be all-the-greater because the weather up through most of November has been mild.

Ewing and AGA President David Parker believe they will see stand-alone legislation in the Congress "hopefully early" in 2006 to improve access for drilling, pushed in part by cold weather and high prices.

It would include access to off-limit areas of the Outer Continental Shelf and land areas, particularly non-park federal land. "Whether we get it will depend on how cold the winter is and how high prices go," Parker said, noting that it will be an election year when congressmen tend to be "energized by price issues." He also hopes to see an extra $1 billion funded for low income heating assistance.

The greatest exposure to high prices is in the upper Northeast, Ewing said, and the push is to get infrastructure in place to deliver more gas to the area. DTE, with subsidiary MichCon, is part of a project to send western Canadian gas East from a border connection near Buffalo, NY through Empire Pipeline, to be connected with Phase I of the long-stalled Millennium project, which will carry gas to just outside New York City. There it will connect with Tennessee, Algonquin and Iroquois to deliver gas to New England.

Other sponsors of the project include NiSource and KeySpan. Anchor customers are Columbia Gas, KeySpan and Consolidated Edison. If all goes as planned, an extra 500 MMcf/d could be delivered into the northeastern market by next winter -- but not this winter (see NGI, Aug. 8 and Oct. 17).

For now, AGA members are pushing conservation and alternative energy such as clean coal, biomass and nuclear energy, to take some of the heat off natural gas. That and increased supply and more market area storage to act as a shock absorber for peak demand should alleviate the volatility and higher prices created by the tight supply/demand ratio.

Local distribution companies also are partnering with local social service organizations to gain help for the needy this winter.

On the issue of the richer gas stream coming from some LNG imports, AGA would like to see the Federal Energy Regulatory Commission issue a rulemaking for pipelines to come in with standards on a case by case basis, since all LNG is not alike and all pipeline quality is not the same. The LDC organization also is hoping to see some new regulatory approaches such as decoupling volumetric rates from rate of return, Ewing said.

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