Energy policymakers are quickly headed for disaster this winter, said DTE Energy Gas President Stephen Ewing, the 2006 chairman of the American Gas Association. He said the magnitude of the situation will dawn on the nation's 52 million natural gas consumers when they get their gas bills about mid-December and see massive cost increases. But there is still time for the industry to do something about it.
At the Natural Gas Roundtable in Washington, DC, on Thursday, Ewing said the natural gas industry needs to "coalesce around three things:" pressing Congress for full appropriation of the Low Income Home Energy Assistance Program (LIHEAP), which Ewing called the "only safety net for the winter;" communicating the need for conservation; and promoting even more aggressively a second energy bill that ensures rapid development of an Alaska gas pipeline, more liquefied natural gas import terminals and "most importantly and most significantly" access to reserves that are currently off limits in the Rockies and the Outer Continental Shelf.
"We need to do this now," Ewing said, because potential policy failure is just around the corner. Ewing provided the analogy to the current energy situation of canoeists suddenly realizing there's a waterfall up ahead. He said energy policymakers embarked on the canoe trip in the 1990s when gas prices were below $2/MMBtu. "They promoted gas-fired power generation (200,000 MW were added) while at the same time imposing restrictions on the development of incremental gas supply."
While they continued downstream the river's current became stronger and stronger. They began to hear a noise in the distance, a waterfall up ahead. "That waterfall is the winter of 2005-2006," Ewing said, created in part by failed energy policy and in part by the hurricanes that damaged supply infrastructure in the Gulf of Mexico this year.
The industry and its policymakers can remain in the boat and go over the waterfall or move to the side of the river and do something about the situation. Energy consumers will grade how the industry performed next spring and right now it appears the industry will fail, said Ewing. There is very little time and little that can be done in the short term, he admitted.
However, there are a few things that require immediate action and one is to ensure that the $5.1 billion in proposed funding for LIHEAP in 2006 is passed to help "very vulnerable low income gas customers." In response to a reporter's question, Ewing said he would not support a windfall profits tax on gas producers that funds LIHEAP (see related story). He said "selecting one section of the economy" to pay for this would be "problematic at best."
AGA President David Parker sent a letter to Rep. Joe Barton (R-TX), chairman of the House Energy and Commerce Committee, on Thursday expressing appreciation for the inclusion of an additional $1 billion for LIHEAP in the committee's budget reconciliation package and urging Barton to support an amendment that Rep. Bob Rush (D-IL) plans to offer that would add an additional $2.92 billion for LIHEAP. "This would bring total fiscal year 2006 funding for LIHEAP to approximately $5.1 billion, the amount recently authorized in national energy legislation," Parker noted.
Parker also said a recent survey by the National Energy Assistance Directors' Association of the effect of rising energy costs on poor families revealed that the high cost of energy is forcing them to sacrifice medical care, miss mortage payments, go without food and skip payments of energy bills. "Furthermore, the number of households receiving LIHEAP assistance has increased from about 4.2 million in FY 2002 to more than five million this year, the highest level in a decade," he said. "LIHEAP applications are expected to increase significantly this winter. Your leadership on this matter will go a long way to help relieve the burden of high energy costs for low- and fixed-income households," Parker told Barton.
Ewing said second thing that the industry needs to do immediately to deal with this problem is a better job of communicating a strong conservation message, informing customers, for example, "the rule of thumb that every degree [decrease on your thermostat] can lead to as much as a 3% savings on your energy bill." He also said utilities need to communicate heating safety issues with customers because faced with a shortage, consumers often endanger themselves by trying to heat their home with ovens or kerosene heaters.
And the third thing is that the industry should "get serious about a long-term solution" the natural gas supply-demand problem. Ewing said under the current policy structure and market situation there will be a "permanent imbalance" of supply and demand.
"We need a second energy bill," he said, with legislation that ensures an Alaska pipeline, more LNG terminals and greater access to gas resources. He also said the country should quickly find a solution that allows development of more nuclear power. "We need to be even more aggressive on a second energy bill," said Ewing.
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