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12.17.03 Congress suspects gas prices unnatural Some Congress members are promising an investigation into whether an unexpected surge in natural gas prices since Thanksgiving is the result of gouging or market manipulation. Prices on the spot market have risen about 50 percent nationally since Thanksgiving, and some analysts say there is no strong reason to support the rise. Natural gas prices generally have been up since last winter, but consumers in the Midlands will be largely protected from the latest spike by the way local utilities buy their gas. George Minter, a spokesman for Aquila Inc., said the increase "will have a minimal immediate effect" on Nebraska bills. Both Aquila and the Metropolitan Utilities District lock in the price of a portion of their gas in advance and further protect themselves by storing gas. The advance contracts and the storage help them ride through price surges. It is short-term contracts that are affected by price spikes. As it does every month, M.U.D. set its short-term contracts for December at the end of November, said Jerry Gohr, assistant general manager. That timing enabled the utility to avoid most of the latest runup. What matters most for M.U.D. customers now will be the price at the end of December, which will determine how much customers pay in January, when temperatures typically plunge. If prices nationally stay high, Minter cautioned, the effect on bills locally could be significant. Natural gas prices, on both the spot and futures market, have soared nearly 50 percent since just before Thanksgiving. The spot price at a key trading center Tuesday was $6.59 per thousand cubic feet, compared with $4.45 on Nov. 25, an increase of 48 percent. Industrial users of natural gas have called for an investigation. Sen. Orrin Hatch, R-Utah, chairman of the Senate Judiciary Committee, has promised hearings on the issue. "We must determine once and for all if these price surges are the result of market forces or if there continues to be price manipulation," he said. Hatch said he couldn't understand how normal market forces could cause a 50 percent price jump so quickly when supplies appear adequate. Last week, the Energy Department said natural gas supplies remained at nearly 3 trillion cubic feet, slightly above the five-year average for this time of year. Of particular concern, economists say, is the prospect that continued high gas prices could so increase manufacturers' costs that the economic recovery would be slowed. Energy Secretary Spencer Abraham said the recent severe weather in the Northeast and Midwest was a factor in the price surge, but "it may not be the only factor." Still, he cautioned against "premature finger-pointing" and warned that price volatility would continue if gas production is not increased. While current stocks appear to be adequate, they are not at a comfortable level, he said. Analysts said that two recent weeks of higher-than-expected natural gas demand also led traders -- who thought prices would moderate this winter -- to shift gears and move to cover any potential losses, driving up prices. Both the Federal Energy Regulatory Commission and the Commodity Futures Trading Commission are keeping an eye on natural gas markets, but neither agency has indicated that anything illegal is going on. "We are keeping a close watch. We watch the markets on a regular basis. We're are certainly aware of the situation," said FERC spokesman Brian Lee. Some analysts argue, though, that there is no legitimate reason for gas prices to have increased so rapidly. "Traders are hyping the markets. There are producers that are hyping the potential shortages. . . . I don't want to call it a conspiracy, but all of these players are operating in concert," said Fadel Gheit, senior energy analyst at Oppenheimer & Co. In general, market gas prices already were higher before the latest spike. The price that M.U.D.'s customers are paying this fall has averaged 13 percent more than last year. But that doesn't mean bills are equally higher. The weather, so far, has been milder than a year ago, easing pressure on homeowners. Regardless of what happens to the market price of gas, both M.U.D. and Aquila are raising the amount they charge to deliver gas, which is separate item on a homeowner's bill. Aquila customers already have begun paying a higher amount, and are waiting for state regulators to set the final amount of the increase (which will be less than the temporary increase). M.U.D. customers will start paying more in January, and the M.U.D. board may vote on that increase Friday. The biggest factor in heating bills is the weather. If the nation has a normal-to-mild winter, prices should moderate. |
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