NGI The Weekly Gas Market Report
As soaring December bills for natural gas use hit the home frontin Illinois last week, city and state officials opened a broadinvestigation into the causes of skyrocketing prices and madeattempts to increase assistance to low-income households.
Spurred by the urgings of Gov. George H. Ryan and variouslegislators, the Illinois Commerce Commission voted 5-0 to open aninvestigation into this winter’s price spikes. The ICC alsodirected its staff to put together a report in 60 to 120 days.
Chicago and suburban mayors, who gathered last Monday to supportextension of the assistance program, also called on the ICC toinitiate an emergency rulemaking to investigate natural gas pricingby the state’s gas companies. The action follows the governor’screation of the state’s first ever Energy Cabinet last week, andhis call for a gas price investigation.
“Recent developments and volatility in the energy marketexperienced by the citizens of this state and nationallydemonstrate an immediate need to create a framework for handlingenergy-related issues in the most effective manner,” Ryan stated.The energy cabinet will be co-chaired by the governor’s senioradvisor on environment and natural resources and his senior advisoron regulatory affairs and will be comprised of key members inRyan’s cabinet.
“I call on the ICC to complete a full investigation of therecent natural gas price increases. Although, to date, natural gasutilities have been cooperative, we need assurances that Illinoisconsumers are not being taken advantage of,” the governor said.
Commission spokesman David Farrell said a series of hearings onthe utilities will be held starting on Jan. 18. Another meeting istentatively scheduled for Jan. 24 with producers.
“This is not a witch hunt, or total fishing expedition,” Farrellsaid. It is to receive “assurances that people in Illinois are notbeing taken advantage of.” The spokesman said he believes theinvestigation will reveal that it is simply the way the marketworks. “The prices were not there, nobody drilled, all kinds of newuses for gas emerged, the economy took off, and we have morehousing stock under construction within the last five years thanprobably during the previous 20.”
In addition to the special investigation, the commission alsoasked its staff to expedite its annual prudence reviews of IllinoisLDC’s gas purchases for the past 12 months.
“This year, of course, it will be different, because everyoneincluding their sister and brother will be in reviewing and asking,’were you consistent with the market generally,'” Farrell said. Hepointed out that these reviews can normally take a year or more,but the commission asked for the 14 different prudence reviews tobe completed by the end of the calendar year.
The focus on natural gas prices by the mayors’ coalition isbeing led by Chicago’s environmental office, which contendsdistributor Peoples Gas acted imprudently in failing to hedge. Thedistributor “has the tools to hedge, but it did not,” a spokesmanfor the environmental office said. Peoples rates to residentialscurrently are $9.70 MMBtu. “While industrial customers locked inpurchases last summer, the city did not. They should have seen thiscoming and done something similar.” The city will pursue itschallenge in the annual rate review coming up in the spring. Partof that challenge will include whether the diversified businessesof parent, Peoples Energy, which has an E&P subsidiary,conflicts with its role as a utility.
Robert J. Kelter, director of litigation for the CitizensUtility Board (CUB), said, “I would be surprised if very much comesout of these hearings. I assume that they are going to ask peopleto give testimony, but I am not sure what a public interest groupcan say. Prices are way too high, the market is out of control, andconsumers are getting screwed.” Kelter said. CUB asked the ICC toorder Peoples [Gas] to start hedging more, but the commission didnot do it. He said if the commission had listened it might haveprevented some of the current problems.
Kelter said he hoped the investigation would delve into whetheraffiliates of Peoples Energy and Nicor Gas were purchasing gas atbetter prices than their utilities. “If the utility’s affiliateshave been able to purchase gas cheaper than the utilitiesthemselves, we want to know why.”
Once the special investigation is completed sometime thisspring, a final report including transcripts from the hearings andaccompanying recommendations will be forwarded to the EnergyCabinet which Ryan formed earlier in the week. The report will thenbe forwarded to the governor, and then on to the general assemblyin an effort to develop guidelines for a statewide energy policy.
Kelter remains pessimistic about the investigation, “I don’t seethe ICC doing a thorough investigation on whether gas producers aregouging Nicor and Peoples in some way,” he said.
In a related action, ICC Chairman Richard Mathias asked theFederal Energy Regulatory Commission to look into whether theprices charged by natural gas pipeline companies to LDCs are thesame as those published rates on file with the federal agency.
The Illinois legislature voted early last week to expandeligibility requirements, allowing an additional 47,000 families inthe state to apply for the Low Income Home Energy AssistanceProgram (LIHEAP). The legislative action extends the LIHEAP programto families with incomes of less than 150% of the poverty level, or$25,575, up from the previous 125% or $21,312 limit. The 150% isthe maximum allowed under the federal-state program.
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