Just as the Department of Energy (DOE) reacted to public outcryover high oil and gasoline prices, Energy Secretary Bill Richardsonand FERC need to find out why wholesale natural gas prices havesoared to more than $4 since the start of the year and preparecustomers for possibly higher gas bills next winter, a majormunicipal gas group said yesterday.

If they don’t, the group warned the public’s reaction will bedeafening when the wild wholesale price fluctuations are reflectedin gas bills next fall and winter.

“…[I]n light of clear warning signs of higher prices ahead fornatural gas consumers, we believe that the Department of Energy andthe Federal Energy Regulatory Commission have a duty to determinewhy natural gas prices are at all-time highs and to consider thepolicy implications of such analysis,” wrote Leslie B. Enoch II,president of the American Public Gas Association (APGA) and CEO ofthe Middle Tennessee Gas Utility District, in a letter that wasdelivered to Richardson and FERC Chairman James Hoecker yesterday.

“For the first time in its history, a Nymex contract recentlyclosed above the $4.40/MMBtu level. This is noteworthy not onlybecause the price for natural gas is at the highest level ever forthis time of year, but also because these are the highest monthlyprices for natural gas experienced since deregulation in the1980s,” he said.

“We realize that many factors impact natural gas prices, andthat absent market distortions, the marketplace will usuallydetermine the proper price. However, the cause for the extreme 100%increase in just five months should raise concerns with regulatorsand policy makers in Washington,” Enoch noted.

“Wholesale natural gas prices above the $4 level will causesignificant economic harm to the American consumer…..” Hebelieves a “whole gamut of issues” are to blame to the gas pricerun-up—higher crude prices, sluggish production activity, lowstorage injection and inordinately high gas demand by powergeneration — and they need to be reviewed by the Clintonadministration before the onset of winter. Granted, some factors— like the weather — “can’t be fixed,” but others are withinthe power of DOE and FERC.

Enoch believes the agencies especially should look at the”energy policy considerations” of using more and more gas to fuelpower generation. They need to determine whether this is the “best,efficient use of a limited resource,” he said. “What real benefitis it [gas-fired generation],” he asked, when traditional gas usersare forced to pay the price for it.

APGA Executive Director Bob Cave conceded he wasn’t “reallysure” there was anything DOE or FERC could — or would — do tomitigate the escalating wholesale gas prices. But he agreed therewere a number of policy issues – such as supply availability,storage and the increased use of gas by electric generation—“that can be looked at and evaluated” prior to winter.

“If we’re going to be looking at high rates next winter, we wantto be prepared and inform our customers in advance,” Cave said. TheAPGA represents more than 480 municipal and other publicly ownedgas distribution systems nationwide, which primarily cater tocommercial and residential customers.

Unlike with oil, where higher prices translate almostimmediately into higher gasoline prices for customers to see at thepump, natural gas has a much longer lead time between wholesaleprice increases and their impact on residential customers, henoted.

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