8.22.08

Utilities project up to 20 percent hike in natural gas price
By: Chet Mullin, Omaha World-Herald

Utilities serving the Omaha area are projecting natural gas price increases of as much as 20 percent and are urging customers to start conservation measures before cold weather hits.

Forecasts of 15 percent to 20 percent increases in rates still are only that -- projections, utility officials said.

"There are a lot of variables out there," said Jim Knight, vice president of gas operations at the Metropolitan Utilities District.

The projected 15 percent increase in prices from December to March would mean a total of about $70 more in the average customer's bill over the four-month heating season, said Mari Matulka, director of corporate communications at M.U.D.

Dan Mechtenberg, vice president for Nebraska natural gas operations for Black Hills Energy, said the utilities have little influence over rates.

Three-quarters to 85 percent of a bill is attributable to the gas itself or to pipeline-related charges, he said, adding that those costs are passed on to customers without markup.

Black Hills Energy bought Aquila last month.

Market prices for natural gas can change quickly due to events such as destructive hurricanes in the Gulf of Mexico or sustained frigid weather in northern regions of the country, Mechtenberg said.

Both utilities recommended that customers take conservation measures now, such as boosting insulation and weatherizing homes.

Knight said factors contributing to the projections of higher rates are: Prices on the futures market are up; the cost of crude oil remains high; electric utilities are using more natural gas to produce electricity; and imports of liquid natural gas are down from last year.

"If we have a 'normal' winter the usage could be less than last year . . . and that would offset some of the price increase," Knight said.

Consumption increased about 9 percent during the last heating season because of colder-than-normal temperatures, he said.

Matulka said M.U.D. customers spent an average of $555.54 during the last heating season for 629 therms of natural gas. This year, based on current estimates of gas rates that are 15 percent higher and a "normal" winter, the average customer would spend $583.55 for 585 therms, she said.

All this would change, Matulka said, if the winter is colder or warmer than normal.

She urged all M.U.D. customers with outstanding bills to call 504.7002 soon to work out a payment plan. People not on the budget payment plan should switch to it, because it levels payments by spreading them out equally over 12 months, she added.

Knight said congressional action to lift drilling restrictions in the United States also could help control rates.

"Psychologically, it might improve the price outlook, since markets are always looking forward. Traders might say that allowing drilling will increase the supply."

Matulka agreed that it's hard to say exactly how much rates might increase. "Anything can happen day to day."

"Just lowering your thermostat from 70 degrees to 66 degrees lowers consumption by 13 percent," so it's possible to offset some of the increase, she said.

Black Hills Energy, which recently acquired Aquila's natural gas operations in Nebraska, says that industry experts are predicting that prices could be 20 percent higher this winter, compared to last year.

Again, it all depends on the weather and other factors.

Another factor in the predictions of rates that are 15 percent to 20 percent higher is that nationally the amount of stored gas is down about 10 percent from last year's levels at this time, Knight said.

He said M.U.D.'s storage capacity was "full and ready to go for this winter."

In a press release, Dan Mechtenberg, vice president for Nebraska natural gas operations for Black Hills Energy, said, "Approximately 75 percent to 85 percent of a gas bill is for gas commodity and pipeline-related charges, and we don't profit from those costs . . . (which are) passed through to customers without markup."

He said that market prices for natural gas can change quickly due to unforeseen events such as destructive hurricanes in the Gulf of Mexico, or sustained frigid weather in northern regions of the country.

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