Echoing the warnings of many other utilities across the country, Alabama Gas Corp. (Alagasco) told its gas customers last week that higher bills are on the way this coming heating season. Following Piedmont Natural Gas’ lead earlier in the week, the utility also called for the implementation of a comprehensive national energy strategy, which it believes is necessary to address high natural gas prices.

Noting that there has been a dramatic increase in wholesale gas prices over the past few months, Alagasco clarified that this is a national situation affecting the entire energy industry and all natural gas customers in the United States. Even as gas has become the go to fuel for many homes and industries, the utility pointed out that gas production has not kept pace with rising demand, and the market price of natural gas reflects this.

On March 1, Alagasco, which supplies a majority of gas service in central Alabama, increased its rates to begin recovering these increased gas costs. However, the March 1 increase has not had a significant impact on most customers yet due to the fact that their gas usage is low during the summer, the utility pointed out.

“We had hoped natural gas prices would decline this summer and that we would be able to pass those savings on to our customers,” said Alagasco President Dudley Reynolds. “However, wholesale natural gas prices for the coming year have remained high nationally as a result of low gas storage levels, slow gas production response and continued demand for natural gas across the United States.

“We believe the best thing we can do for our customers is to inform them about higher natural gas costs now, even though at this time of the year the impact on their bills is relatively small. As we enter the fall and winter months, we want our customers to be prepared for the possibility of higher heating bills.”

While preaching conservation, Alagasco assured that it will meet the energy needs of its customers for the upcoming winter heating season, but the cost may be high. “We have a long history of working with our customers,” Reynolds said. “We simply ask our customers to give us an opportunity to work with them before a bill paying crisis occurs.”

Like Piedmont, Alagasco said it believes that a major step toward addressing the nationwide issue of high natural gas prices on a long-term basis is for Congress to enact a comprehensive national energy strategy.

“A strategy would encourage development of the plentiful natural gas reserves in North America while ensuring that the new infrastructure necessary to bring this additional gas to market is in place in a timely and economical fashion,” Alagasco said. “In the long term, a national energy strategy will help alleviate the volatility in natural gas prices plus ensure that new supplies and access to those supplies will be available in the future.”

Piedmont Natural Gas said a normal temperature winter could bring a 20-30% increase to its customers’ natural gas bills, while a colder than normal period could send those bills much higher.

While not expecting a supply shortage this winter in its market, the Charlotte-based natural gas utility said growing demand and a tight supply forecast are contributing to higher national wholesale gas prices.

To address this issue, the company said it is seeking the adoption of policy that would expand access to gas. “Our nation’s elected officials need to enact a sound national energy policy which promotes access to and delivery of our abundant domestic gas resources to meet this growth in market demand,” said CEO Thomas E. Skains.

Skains noted that the current gas price on the NYMEX commodities exchange is above the $5.00/MMBtu range, significantly above the historical summer price. Piedmont said the high summer and winter prices are attributable to greater demand associated with the refill of storage fields which are below normal inventory levels as a result of last winter’s colder than normal weather, increased requirements to serve new or converted electric power plants fueled by natural gas and the lack of exploration and development efforts to meet the increased market demand.

Noting that changes in wholesale gas costs are passed through to the customer for better or for worse, Skains said, “We don’t like higher gas prices at Piedmont Natural Gas anymore than do our customers. Higher prices reduce retail demand for natural gas, increase our operating expenses, and challenge our efforts to maintain good customer relations.”

Piedmont Natural Gas is primarily engaged in the distribution of natural gas to 740,000 residential, commercial and industrial customers in North Carolina, South Carolina and Tennessee, making it the second-largest natural gas utility in the Southeast.

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