Natural gas costs soaring; customers expect high bills

A typical monthly bill for Michigan Gas Utilities customers could go up to more than $80 a month this winter.

By CHARLES SLAT

Evening News staff writer

Heating a home with natural gas this winter may cast a big chill on household budgets.

Natural gas costs have been heating up nationwide in recent months, and Michigan Gas Utilities (MGU) will be passing along the increases.

"It is possible with the price increases that our customers could see up to a 30 to 40 percent increase in their gas bill compared to last year," said Paul Livernois, an MGU spokesman. The typical monthly bill for an MGU customer using 10,000 cubic feet of gas is $57.92, according to the Michigan Public Service Commission. A 40 percent increase would drive it up to more than $80.

After relatively stable prices over the past few years, costs are rising due to various factors related to demand.

"Just normal growth of new homes and businesses is at a remarkable rate across the country; however, other factors are coming into play," he said.

One factor is that natural gas storage injection levels are 25 percent lower than last year at this time, partly because high prices are leading companies to sell the commodity rather than store it.

Meanwhile, increased demand for natural gas from large industrial customers has risen significantly over the past three to five years. One reason is that faced with new environmental restrictions on emissions from coal-burning boilers, industries  including some electric power plants  have converted to natural gas as a fuel or have installed pollution control devices called "scrubbers," which use natural gas. That also means natural gas is used more in the summer than in the past to provide electricity that keeps air conditioners humming.

Facilities that use oil as a fuel also are moving to natural gas because, despite higher prices, its still cheaper than oil. That means a lot of fuel oil customers also have been converting to natural gas where they can.

In fact, MGU is extending natural gas to Holnam Inc., the cement-making plant near Dundee, to supply fuel to its pollution control systems. Along the way, about 15 homes will have new access to natural gas.

Past years of low natural gas prices also have cut the amount of drilling and exploration for new natural gas fields, according to Mr. Livernois. "So far this year, drilling is up approximately 64 percent compared to 1999. However, there is an approximate two-year lag from drilling new wells until the gas is available for customer use," he said.

Because of the volatility of prices, MGU has asked state regulators to increase the amount it can charge customers to pay for the natural gas it has to buy, its so-called Gas Cost Recovery Factor charge. A rate of $3.81 a thousand cubic feet of natural gas was established for 2000, but the company finds itself needing a late-in-the-year adjustment. It has asked state regulators to increase that factor to about $5.61 a thousand cubic feet.

"This is extremely unusual," said Mr. Livernois. He said normally the rate is reduced as the year progresses.

The PSC will decide on the MGU request Sept. 27. Depending upon how quickly it acts, that higher cost might be reflected beginning with October bills, Mr. Livernois said. Customers who use MichCon and Consumers Energy natural gas should be insulated from the higher costs for a while because the PSC has imposed a rate freeze on those utilities.

Mr. Livernois said MGU merely is a gas distribution company, so it doesnt profit from such rate increases. The exact cost of the gas is passed along to customers.

But the cost of natural gas makes up the biggest chunk of the gas bill  about 60 percent of it. Another 20 percent covers the cost of getting the gas from suppliers and the remaining 20 percent are local delivery charges.

MGU, headquartered in Monroe, provides natural gas to about 152,000 customers in the southern and western portions of Michigan, including much of Monroe County.

http://www.monroenews.com/todayfront/news3/02195876.htm

-- Martin Thompson (mthom1927@aol.com), September 15, 2000