NGI The Weekly Gas Market Report
From coast to coast, utilities and local distribution companies(LDCs) are preparing for the peak natural gas-usage season thiswinter by filing rate hikes with regulators, and bracing theircustomers for inflated gas prices that are still to come.
“Soaring prices” and “lower than normal storage” were phrasesthat were sounded repeatedly at the Governors’ Natural Gas Summitlast week in which governors, industry experts and otherparticipants gathered in Ohio to discuss strategies and alertcustomers of what is to come this winter.
“We want Ohioans and all Americans to be prepared,” said BobTaft, governor of Ohio. “Our first step is to help consumers, bothresidential and industrial, develop strategies to address therising natural gas costs we will face this winter. It is criticalthat states take the lead in making sure our low and fixed-incomecitizens are assured of affordable supplies to heat their homes inthe winter months. Today’s summit also served as an excellentopportunity to educate decision makers and to starting developingstrategies to expand the natural gas supply here in Ohio and acrossthe country.”
With historically low gas storage levels and wholesale pricesalready at record highs, home and business owners from Rhode Islandto Oregon are being advised by their respective suppliers of justwhat’s in store when the mercury drops.
“We do not want consumers to be surprised by higher natural gasbills this winter,” said Ken Lawrence, president, PECO Energy.”Energy prices are up significantly across the country. This is anational phenomenon not unique to PECO, or natural gas.”
Effective on the first of this month, the rate which wassubmitted to the Pennsylvania Public Utility Commission for PECO’ssuburban natural gas customers rose 6.5%, from 71.8 to 76 cents perccf. PECO plans on raising its rate again come Dec. 1, to 85 or 90cents per ccf based on continued higher wholesale prices. PECO’sPennsylvania residential customers who paid $136 for a month’susage of 200 ccf last year, will pay about $172 a month this year.
“The high prices should be temporary, but the period of time isuncertain. That will depend on how cold it is this winter anddemand over the long term. The critical point for consumers thisyear is the higher prices coupled with the expectation of a colderwinter will affect all of us.”
PECO, however, is not the only company firing the emergencyflare into the sky. The Rhode Island Public Utilities Commissionwill hear Providence Gas’ rate hike case on Sept. 27. ProvidenceGas is filing for an increase of $2.18 per Mcf to be effective Oct.1, which will boost Rhode Islanders’ average annual bill byapproximately $237, or 22.4%.
Unitil/Fitchburg Gas and Electric (FG&E), a gas and electricretail distributor, has likewise filed with the MassachusettsDepartment of Energy and Telecommunications seeking an 11.5%increase on gas over last winter’s rates. A typical FG&Eresidential customer using 146 therms of gas per month can expectan increase of $14.11 on their bill if the department approves it.
Central Illinois Light Co. (CILCO) is another example. CILCObegan a campaign entitled Operation Energy Smart to prepare itscustomers for gas prices it said would be “at least 50% higher”than last winter. The program is attempting to teach customersenergy saving tips, and inform them of billing plans, which mightbe helpful. “We don’t want anyone to be surprised when cold weatherarrives,” said Neal Johnson, CILCO legislative & public affairsrepresentative. “For the last three years natural gas prices havebeen stable. But natural gas is a commodity and as such it issubject to the fluctuations of the market’s supply and demand.”
Cleveland-based Dominion East Ohio filed last Friday with thePublic Utility Commission of Ohio to increase its rate from $6.15to $7.18 per Mcf. Based on this new rate increase which will beeffective in late October, residential customers can expect to pay$70 more per month during November, December and January, whencompared to a year ago.
“Despite significant national market price increases, ourcompany has continued purchasing and injecting natural gas into ourstorage fields, as scheduled, to ensure that we’ll have sufficientsupplies to serve our customers this winter,” noted Edgar M. Roach,Dominion East Ohio CEO.
Xcel Energy’s Public Service Co. of Colorado last week filed agas cost adjustment with the Colorado Public Utilities Commissionseeking a $126.2 million annual increase for natural gas costs. Ifapproved, the increase since Oct. 1999 would be $28.75 or 39.6% permonth for residential customers and $146.16 or 48.6% per month forcommercial customers. “While everyone seems to notice the high costof gasoline at the pump, many of our customers are not aware thatnatural gas prices in the marketplace have climbed to unprecedentedheights,” said Cynthia Evans, Xcel Energy’s vice president forColorado, Wyoming and Arizona.
“If they haven’t already, now is the time for our customers toconsider things they might do to reduce their natural gasconsumption this winter,” said Evans. “There are many privatecontractors in the area that provide home energy audits andweatherization programs.”
This small sample of the nation’s utilities and LDCs ends inOregon, where Portland-based Northwest Natural Gas filed last monthwith the Oregon Public Utility Commission to increase its rate by24% due to the rise in price of gas. The company said increased useof natural gas to power electricity generating plants has madedemand outweigh the available supply. Northwest is offering itscustomers different pay programs to help ease the inflated cost ofgas.
CILCO’s Johnson summed up the problem, “The cost of natural gaswas cheap for so long, they [exploration & production] reallywere not doing any exploration or putting anymore rigs in theground….. There [also] have been a lot of conversions over tonatural gas because it is still a better bargain. All theseadditional market demands increased, and the supply hadn’t. Now weare seeing more exploration and drill rigs being put into theground to explore and expand the supply, but there is usually a sixto seven month lag before you will see any price relief at thewellhead. That’s not going to do our customers any good during theheating season.”
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