Of course inflation is completely under control......

California Energy Consumers to See Electric Bills Rise Substantially

Source: Knight Ridder/Tribune Business News

Publication date: 2000-09-23

Arrival time: 2000-09-25

Sep. 23--The economy is still roaring, and more businesses are doing more business, which is good. They're also eating up more energy, which won't be good when it comes time to pay your natural-gas bills this winter.

Pacific Gas and Electric Co. says its customers likely will see their winter natural-gas bills climb by as much as half, because increased demand has been pushing up market prices.

That means an average residential monthly bill of $50 would climb to about $75, PG&E spokeswoman Staci Homrig said.

"Demand across the nation is up for all forms of energy, including natural gas," she said. "Supply is tight right now, because in the past few years, prices have been low, and there's been less production."

John Sharp, vice president of the Natural Gas Supply Association in Washington, said unprecedented demand for natural gas by electricity producers has tightened supplies, but he wouldn't speculate whether that might mean higher prices this winter.

First of all, producers are drilling at unprecedented levels to increase supplies, he said. This after significantly reduced drilling in 1998 and 1999, because prices were low and there was no incentive to drill.

"All I can say on the supply side is that we will see additional supplies, which should have a beneficial effect on the market," he said.

Second, no shortfall is expected, he said.

Third, there are too many other factors that could affect prices, such as how cold the winter turns out to be, the amount of storage and so on, Sharp said.

The American Gas Association, which represents 90 percent of natural-gas utilities across the country, is expecting ample supplies nationwide.

"However, it is going to cost more," association spokeswoman Daphne Magnuson said. "It's supply and demand  classic dynamics of the marketplace. It's a strong economy, and demand is high. It's an attractive fuel."

But the higher prices will likely help boost future supplies, she said.

Two years ago, drilling dipped when prices fell below $2 per 1,000 cubic feet. Current prices are exceeding $5 on the spot market, Magnuson said.

In comparison, it was $1.81 last spring when prices hit bottom, forcing many small suppliers, which make up about two-thirds of the supply network, to shut down rigs or halt drilling on new wells.

Now there's a record number of rigs drilling for natural gas, Magnuson said.

Sharp said much of the increased demand comes from utilities that have been hard-pressed to supply enough electricity during the long, hot summer.

Natural gas is a preferred source of fuel for generating electricity among utilities, which have been buying gas at unprecedented levels, he said.

Homrig said that even though power plants have increased gas consumption this summer, utilities account for only about 15 percent of natural gas consumed in the United States.

About 40 percent is consumed by factories and industrial customers, she said.

"And since the economy has been doing so well, those folks have been running at top speed," Homrig said.

During the summer, when prices typically run lower than in winter, PG&E has been increasing its storage of natural gas, she said.

About 20 percent of the utility's winter natural-gas supplies comes from summer storage, she said.

PG&E also has been doing more fixed-price contracts than usual to lock in lower prices for gas that will be used later, Homrig said.

"Typically, analysts predict prices are going to increase, but it may turn around and decrease, so we don't want to get too locked down," she said.

PG&E actually is projecting that natural-gas prices will double for the utility this winter, she said. But consumers total bills won't be doubling.

Take that average $50-a-month home gas bill, for example.

About half of that is delivery charges  fees paid to PG&E to deliver the gas to a home. That part of the bill won't be changing.

The other half of the bill covers the actual price of the gas used. In this case, last winter's $25-a-month average charge promises to double this winter to about $50, resulting in an overall bill that would rise from $50 to $75.

Homrig pointed out that last winter was milder than usual. Even a typical winter could mean boosted consumption, and thus bigger gas bills, she said.

Homrig acknowledged that some customers may be hard-pressed to handle such price increases. She said PG&E has financial assistance available and "balanced bill" plans, which spread increased winter costs over other months.

Consumers also probably can cut energy consumption by taking a home-energy survey that could raise a red flag about faulty equipment, air-duct leaks and so on, she said.

Survey help is available at the utility's Web site, www.pge.com/energysurvey, or by calling PG&E's toll-free Smarter Energy Line at (800) 933-9555.

http://cnniw.yellowbrix.com/pages/cnniw/Story.nsp?story_id=14210658&ID=cnniw&scategory=Utilities%3AGas

-- Carl Jenkins (Somewherepress@aol.com), September 25, 2000