Friday, September 29, 2000

Natural gas prices to soar here

By CHUCK STINNETT Gleaner staff

Been grumbling about high gasoline prices? Just wait until you see this winter's heating bills if you use natural gas.

Heating bills could be 45 percent higher than in recent winters, Owen Reeves, the director of the city Gas Department, told Henderson Rotarians on Thursday.

"Don't look at last year's gas bill" to gauge what this winter will bring, Reeves said. "Throw it out the window."

Natural gas prices the past two winters "have been exceedingly low," in part because mild temperatures held down demand, he said.

But natural gas prices have leaped this year, following the lead of crude oil and electricity prices.

Residential customers here last winter paid about $5.70 per million cubic feet of gas. "Today, it's easy to imagine it will exceed $8.50," Reeves said.

With homes here typically using 90 million cubic feet during the five-month heating season, that means typical heating bills could hit $765 this winter.

"I'm hoping the winter will not be severe and we won't have hurricanes or tornadoes that affect the supply," which would make matters even worse, Reeves said.

"I advise you to do anything you can" to conserve, he said. "Apply all conservation measures this winter. We're in for a price-spiked winter, and there is not anything we can do about it."

The Gas Department has taken several measures to control its internal costs, such as teaming with the city of Carrollton to buy gas in bulk, which Reeves said saves about roughly 10 cents per million cubic feet.

But the city ultimately has no control over big swings in wholesale prices for natural gas, just as service stations have no control over the wholesale price of gasoline, he said.

Besides the general increase in energy prices, a key factor is the increasing number of gas turbine generators, which burn natural gas to generate electricity when power demand peaks in the summer. That has increased the demand for gas and limited the ability of gas systems to buy and store cheaper gas in the summer.

"It's a nationwide trend. It's not localized," Reeves said.

Indeed, the Kentucky Public Service Commission will hold hearings around the state next month concerning the jump in natural gas prices, although it's not clear what impact it can make. The nearest hearing begins at 6 p.m. Thursday, Oct. 19, at the Executive Inn in Owensboro.

Besides the price the city must pay for gas, it could face an increase in the cost that pipeline operator Texas Gas Transmission charges to deliver that gas from Louisiana to Henderson. Texas Gas is seeking a 40 percent increase, though Reeves said it's unlikely to get more than a 20 percent rise.

The climbing costs of buying gas and having it delivered will swamp what savings the city have been able to accomplish.

"We're talking pennies or nickels (in savings through bulk buying) compared to dollars and quarters (for the cost of gas and transportation)," he said.

One thing in consumers' favor is that the Henderson Gas Department loses less than half the gas from leaks in its network of pipes than the typical gas utility. The city incurs a loss of less than 1 percent, compared with the national average of about 2.5 percent, he said.

In addition, the department has launched a long-term program to make sure that every gas meter in the city has been repaired or replaced in the past 15 years. That will take about 12 years to complete, but will help ensure customers that leaking meters aren't costing them money.

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The city of Henderson Gas Department at a glance: The department was founded in 1859 and is the fifth-oldest in the country.

Among the nation's approximately 1,300 gas systems, Henderson's ranks 150th in gas usage and 191st in the number of customers.

It operates on a budget of about $14 million per year.

It delivers gas to approximately 9,000 homes, 1,000 commercial customers and 50 industries.

The large number of industries helps reduce the seasonal ebb and flow of gas usage, using 90 percent of the department's gas in the summer. Consumption nonetheless jumps in the winter as homes and business burn gas in furnaces for heating.

The department contributes $1.2 million annually to the city General Fund and provides $800,000 in free gas to the city.

http://www.thegleaner.com/daily/2000-09-29/news1.html

-- Martin Thompson (mthom1927@aol.com), September 29, 2000