Published Thursday, September 21, 2000, in the Akron Beacon Journal.

Natural gas keeps rising Dominion East Ohio will ask for 17 percent rate increase BY JIM MACKINNON Beacon Journal business writer

Talk about gas pains.

The average Dominion East Ohio residential customer can expect to pay about $70 more per month for natural gas from November through January compared to a year ago, the Cleveland utility said yesterday in announcing its latest rate request.

A normal winter -- colder than the last couple -- could cause customers to pay even more, the company warned.

The former East Ohio Gas said it will ask on Friday for a nearly 17 percent increase in natural gas rates from the Public Utilities Commission of Ohio, the latest in a series of price hikes this year.

The rate, if the increase is approved, would go from the current $6.145 per thousand cubic feet of gas to $7.18, and take effect Oct. 26 for the next three months. The PUCO typically approves all rate increases and decreases, company officials said.

Taxes and distribution charges will add another couple of dollars per thousand cubic feet on top of the higher natural gas rate.

Last January, the natural gas rate, called the Gas Cost Recovery rate on consumers' bills, was $3.76 per thousand cubic feet. This latest rate hike means the gas-cost portion will be nearly 91 percent more than a year ago.

``These are historic high rates,'' said Dominion East Ohio spokeswoman Tracy Oliver.

But don't blame Dominion East Ohio, she said.

Natural gas prices are soaring nationwide because of tight supplies and increased demand.

Low natural gas prices the last several years led to decreases in new well drilling. Meanwhile, the strong economy, coupled with electric utilities' building new gas-powered generators, has caused demand for gas to go up.

With the high natural gas prices has come a sharp increase in well drilling and exploration, but it takes as long as a year to make a new gas well produce, Dominion East Ohio said.

While supplies are tight, Dominion East Ohio said it has enough gas on hand for its 1.2 million customers this winter.

The high gas prices are not because of Ohio's efforts to deregulate the natural gas industry, Oliver said. Starting Oct. 1, Northeast Ohio residents can choose a new natural gas supplier, though Dominion East Ohio will still deliver the gas.

Deregulation may allow customers to save some money on their monthly bills, Oliver said.

The company is prohibited by law from making any money off the cost of natural gas -- it simply passes along any increases or decreases to its customers, generally on a quarterly basis.

Ending Ohio's deregulation of natural gas would not lead to lower prices, said Jeff Murphy, director of rates for Dominion East Ohio. Parts of Ohio have been deregulated since 1997.

The reduced drilling of the last several years, caused by a decline in natural gas prices, ``is really coming home to roost right now,'' Murphy said.

While Dominion East Ohio typically files rate increases or decreases quarterly, it could decide to go back to the PUCO before the next quarter is up, he said. If prices fell for a sustained period, for instance, ``we would reduce our gas cost,'' he said.

It's the producers of natural gas -- companies that explore, drill and produce -- that are making money off the higher prices after going through severe economic hardship from years of low prices, he said. That portion of the natural gas industry has been deregulated for decades, he said.

The higher gas prices have led to a doubling of drilling activity, Murphy said.

That should lead to more moderate prices, he said, but not in time for this winter.

Prices on the New York Mercantile Exchange, where natural gas futures are traded, indicate the market expects some relief by next summer from the current high winter prices, he said.

-- Martin Thompson (mthom1927@aol.com), September 21, 2000

Answers

Hi Martin! Thought I'd add this:

Ohio: Natural Gas Supply Situation 'Critical

Taft, natural gas execs meet in Columbus to discuss high prices

Thursday, September 21, 2000

By JENNIFER SCOTT CIMPERMAN

PLAIN DEALER REPORTER

COLUMBUS - Consumers can keep their household thermostats at a comfy 70 degrees this winter, but theyll pay through the nose for it, natural-gas executives said yesterday.

At a daylong conference in Columbus, discussion focused on supply - described as tight but adequate - and surging demand, which is expected to keep prices high through spring.

Since last year, the price of natural gas has climbed from about $2 per thousand cubic feet to more than $5. Dominion East Ohio, formerly known as East Ohio Gas, expects prices to top $7 by November, raising the average customers bill by about $70 per month during the coldest months of the year.

"I think we have a short-term critical situation, especially for consumers with low or fixed incomes," said Ohio Gov. Bob Taft, who sponsored the conference with the Interstate Oil and Gas Compact Commission, made up of governors from 37 states that produce oil and natural gas. Taft was joined yesterday by Alaska Gov. Tony Knowles, who is promoting construction of a pipeline linking Alaskas abundant natural-gas reserves with the Lower 48 states.

"I wouldnt call it a crisis today, but it is critical in the short term," Taft said of high natural-gas costs. Among the factors causing prices to rise:

Increased demand from consumers. While the last two winters were mild, temperatures this year are expected to return to about normal. In Ohio, that means about 35 degrees on average in December, January and February, according to the Climate Prediction Center of the National Weather Service.

Increased demand from electric utilities. In an effort to supply enough electricity for Americas booming economy, electric utilities are building new power plants powered by environmentally friendly natural gas instead of coal or other fuels. In Ohio, 12 such plants are planned. In the western United States, 50 new plants will be powered using natural gas.

Less seasonal change in demand. In preparation for the winter months, natural-gas companies typically bought and stored natural gas in the summer months, when gas was cheap and supplies plentiful. With increasing demand year-round from electric power plants, "the seasonal nature of gas demand [has] already begun to change," said Stephen Baum, chairman of California-based Sempra Energy, which serves 9 million customers. "The production of electricity clearly is a high priority."

Production lag times. It takes 12 to 18 months for natural gas to make it from a freshly drilled well to pipes leading to homes and businesses. While drilling has increased to meet demand, new wells wont ease tight supplies this winter.

Many of the 20 speakers at yesterdays conference pleaded for federal support to drill areas of the West and East coasts, Gulf of Mexico and Rocky Mountains that now are off-limits due to environmental restrictions or other federal mandates.

But they also asked the government not to adopt price ceilings or other measures to ease the natural-gas crunch. If the government enacts price ceilings, for example, executives said companies will have less incentive to drill new wells, possibly causing demand to outstrip supply.

"Theres definitely supply available," Knowles said, noting 36 trillion feet of natural gas waiting to be tapped in Alaskas underground wells. "We have to allow the market to respond."

E-mail: jcimperman@plaind.com Phone: (216) 999-4871

)2000 THE PLAIN DEALER. Used with permission.

http://www.cleveland.com/news/index.ssf?/news/pd/09gov21.html

-- Carl Jenkins (Somewherepress@aol.com), September 21, 2000.