September 29, 2000

Natural gas prices expected to keep rising

By DAVE GERSHMAN

Essex County Newspapers

Just in time for the colder weather, natural gas customers got the news this week that they'll be paying a lot more to heat their homes this year.

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Boston Gas estimates bills will increase by 20 to 25 percent, but some customers have already seen hikes as high as nearly 70 percent.

That left some of them a bit hot under the collar.

"I got it on Tuesday," said Dick Wilcock of Salem about his new bill that shot up 66 percent. "That's when I went through the ceiling."

Wilcock's fixed pricing plan with Boston Gas went up from $69 to $109 a month.

While those on fixed plans saw the increases first, other consumers will soon notice the difference.

"What we've seen this year is a big swing in the price of gas," said Mike Connors, a spokesman for Boston Gas. He said the company has received higher charges for the gas, and had to pass the cost on to consumers.

Connors said a notice inserted in the new bills explains the hike in local gas rates, which was approved by state and federal regulatory agencies.

He stressed consumers aren't paying to maximize the profits of the gas company. And customers who have trouble paying their bills should call Boston Gas.

"The cost of natural gas has gone up this year," Connors said. "It's not something we make money on."

While Boston Gas is telling customers who heat their homes with gas to expect a 20- to 25-percent increase, Connors acknowledged the hike could be more for some. With all the different factors that go into a customer's bill, he said, "You can't say exactly what it is."

Connors explained the charges on a gas bill can be split into three parts. One is the customer charge, which doesn't fluctuate with the amount of gas used. It's regulated by the state, and reflects the cost to run Boston Gas.

The second item is the distribution charge, which is regulated by the Federal Energy Regulatory Commission, and reflects the cost of transporting the gas along a pipeline that stretches from the Gulf of Mexico to New England.

"Those are basically fixed costs," Connors said.

The part of the bill responsible for the higher prices denotes the actual cost of the gas. This cost changes with market fluctuations, demand and weather. It is not regulated by government agencies.

While the latest spike won't be welcome news, Connors said, it actually brings the cost of gas to where it was in the mid-1990s. Prices were pushed down after that by a series of warm winters that led to a glut of gas on the market. Half of the gas-producing wells in the country shut down because they no longer could make a profit, Connors said.

"Gas prices and energy prices were artificially low for the last three years," he said.

As demand has picked up, prices have gone up as well. However, Connors suggested prices could moderate somewhat in the future as companies begin reopening their wells.

"Those fields have a life cycle," Connors said. "These wells aren't producing yet."

Consumers in this area will be harder hit by the market because New England sits at the end of the interstate gas transmission lines.

"New England has had the highest prices for years because it's been the longest reach from the supplying fields," Connors said.

If there's any consolation, Connors said, it's that oil prices are high, too -- and gas customers won't have to worry about getting a steady supply of fuel.

"We've got plenty of gas," Connors said. "We've got the supply. You can't say that with the oil people."

Wilcock concedes he is "not too happy" with the increase in his bill, but is still glad he doesn't have oil heat.

"I'm a senior citizen, a lot of my friends are senior citizens," he said. "I know they don't have the capacity to take care of the increase."

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