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 last week.

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 lastThursday.

“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…..APGA is veryconcerned for the citizens of the communities we serve. When thebills reflecting current gas prices are received by our customers(especially if such prices do not abate by winter), I expect thefallout will extend far beyond the local communities we serve,” hetold the two agencies. Enoch fears that homeowners’ heating billsfor next fall and winter could be double that of last winter.

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. We need to get back to somereasonable [wholesale price] levels,” such as $2.20, he said. “Whatreal benefit is it [gas-fired generation],” he asked, whentraditional gas users are forced to pay the price for it.

The DOE has begun to take some steps. Last week, DOE officialsmet with a number of gas representatives in St. Louis, MO, toaddress the issue of increased summer demand and the industry’sability to meet it.

APGA Executive Director Bob Cave conceded he wasn’t “reallysure” there was anything DOE or FERC could — or would — do toquickly tame the wild 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 – “thatcan 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.

Susan Parker

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