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Indiana Officials Say Price of Natural Gas to Skyrocket This Winter Source: Knight Ridder/Tribune Business News Publication date: 2000-08-01

Aug. 1--Hundreds of thousands of Hoosier gas customers will face the cold reality of sharply higher heating bills this winter, paying a third more for the natural gas they use, officials said Monday. A customer of Citizens Gas & Coke Utility, which serves more than 250,000 households in the Indianapolis area, is likely to see their bill climb by an extra $30 a month in December, January and February, compared to last winter, said John Whitaker, the company's vice president of corporate affairs.

And that's only if the weather is mild, as it was in 1999-2000.

Citizens Gas isn't the only company that will be sending out higher bills, passing along increased fuel costs to customers.

The three largest natural gas utilities in Indiana -- NiSource, Indiana Gas and Citizens Gas -- serve more than 1.4 million customers.

Much like dramatic gasoline price hikes earlier this summer, industry analysts blame the natural gas price increases on several factors.

Inventories are down because natural gas prices were low, fewer wells were drilled and production was off, according to the American Gas Association.

Nearly all Indiana utilities have asked the Indiana Utility Regulatory Commission for permission to raise their natural gas costs -- some by as much as 40 percent -- to offset the higher fuel costs.

The crunch will even hit people who have their gas bill broken up into 12 equal monthly installments, called budget billing. Those revised budget bills will start showing up in the mail in the coming weeks.

About 93,000, or 45 percent, of Citizens' residential customers are on the budget plan, Whitaker said.

For many of the state's needy, the higher bills could deplete much of the average $247.26 each person receives in state and federal winter heating assistance.

"It's hard to know what people are going to do," said Tom Reel, assistant manager of Housing and Community Services for Indiana.

Last year, 93,901 households in Indiana received financial assistance. About 70 percent of these households heat with natural gas.

The state's $31 million energy-assistance budget is already stretched thin because of price jumps in other fuels such as home heating oil.

"It certainly makes it more difficult to stretch the dollars. In the end, we can serve fewer households with the same money," Reel said.

Bill Trapmann, an analyst with the U.S. Department of Energy, said some of the industry explanations for increasing costs don't wash.

For example, Trapmann said despite a slight slump in 1999, natural gas drilling activity has increased since 1995.

Yet prices for natural gas may have been pushed higher by peak power plants, which supply additional electricity during high demand periods, he said.

Many of these plants are powered by natural gas-fired turbines, which kept demand high during summer months when homeowners generally use natural gas only to heat water, cook and dry clothes.

Other experts say investors are sending the price of natural gas soaring.

"There's a lot of price speculation going on," said Dave Menzer, with the Citizens Action Coalition, an Indiana consumer watchdog group.

Local utilities say they're not making money off the higher prices, though.

Their earnings are based on revenues. Fuel costs are simply passed along to customers, according to charges approved by the state's regulatory commission, which only reviews whether companies are trying to keep prices low.

Indiana Gas customers began paying for higher natural gas prices earlier this summer when the utility commission approved an increase of 14 percent to 18 percent.

The utility has a pending fuel adjustment increase of 4.5 percent to 5.7 percent for the upcoming fall months. If approved, costs also will be passed along to consumers.

NiSource, formerly known as NIPSCO, files monthly rate adjustments. Its fuel adjustment will fall slightly next month, according to the commission.

The Energy Department estimates that natural gas prices will continue to stay high through the first part of next year.

But by the time supply catches up with demand, and prices begin to fall, the worst of the winter may be over, Trapmann said.

"Unless something startling happens, prices are going to be higher. What I am personally praying for is a warm winter."

http://cnniw.yellowbrix.com/pages/cnniw/Story.nsp?story_id=12509285&ID=cnniw&scategory=Energy%3ANatural+Gas

-- Martin Thompson (mthom1927@aol.com), August 01, 2000