9.25.02

Projecting winter natural gas costs difficult
By: Nancy Gaarder, Omaha World-Herald

Nationally, winter heating bills are expected to be higher this year than last, according to a natural gas industry group.

But regionally, utility executives say, consumers may see bills remaining about the same.

Competing forces affect prices. If the economy strengthens, rising industrial demand for natural gas would push up prices. At the same time, winter is forecast to be warmer than normal, and if that happens, demand and prices could drop.

One thing everyone agrees on is that the annual uncertainty of projecting winter fuel costs has been made more uncertain this year by the threat of war with Iraq and the possibility of additional terrorist attacks.

The Metropolitan Utilities District and Aquila Networks say that if the winter forecast holds and nothing destabilizes the supply, customers should see bills that are similar to last year's. That would be good news for Midlanders' pocketbooks. Customers of M.U.D., for example, spent 33 percent less last winter because of mild weather than they normally would have.

"Everything that we see now indicates that it is going to be much warmer than normal," said Tom Wurtz, M.U.D. general manager. "The total bill will probably be less than a normal winter, but at or above last year."

M.U.D. customers on the level-payment plan have seen their bills drop 6.1 percent, said Roger Burmeister, manager of rates and regulatory affairs. At Aquila, the average level-payment plan amount has dropped 29 percent, said spokeswoman Jan Davis.

The difference is in how the two utilities handle overpayments. M.U.D. refunded $12 million, while Aquila credited accounts.

M.U.D. provides natural gas to about 186,000 customers in the Omaha area. Aquila, formerly Peoples Natural Gas, supplies gas to 218,000 customers in eastern Nebraska and Council Bluffs.

If this winter brings normal weather, gas bills could rise significantly. M.U.D. bills could go up 50 percent. That price increase would not be due to M.U.D., whose rates haven't changed since 1992. Rather, the hike would come from companies supplying the gas.

Regionally, the U.S. Energy Information Agency estimates that the average gas bill in the Midwest would jump 17 percent if the winter is normal. Aquila is estimating bills would go up about 18 percent.

A national industry group, the Natural Gas Supply Association, is projecting higher gas prices this winter for various reasons:

• Weather. This winter, the group believes, will be warmer than normal but colder than last year.
• Economy. The economy, it says, will be on the rebound, boosting demand.
• Volatility in the Mideast. As heating oil prices spike, manufacturers switch to natural gas, pressuring natural gas prices.

The organization said wild cards could skew prices:

• Winter could turn out to be warmer or colder than forecast. Oil prices could escalate if the U.S. goes to war with Iraq. Another terrorist attack could undermine the economic recovery. The recession could return.
• The United States is expected to enter the winter with near record amounts of natural gas in storage. While that typically would temper prices, it is countered by the fact that production is down.

M.U.D. builds up reserves each year to use during winter price spikes. Those reserves, according to M.U.D., save customers about $7 million a year in lower pipeline-demand charges.

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