Kansas: Natural gas prices more than triple from a year ago

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Natural gas prices more than triple from a year ago

By STEVE EVERLY - The Kansas City Star Date: 12/04/00 22:15

Natural gas prices posted another record Monday, hitting levels that are more than triple the prices of a year ago.

Gas prices were so volatile that on the New York Mercantile Exchange, where the fuel is traded for future delivery, they triggered a one-hour trading halt. Under a previously agreed-to plan, trading is halted when prices rise 75 cents per 1,000 cubic feet of gas.

"I've never seen trading halted like this," said one trader. "It's hard to think that this move is over just yet."

The exchange saw prices for natural gas to be delivered next month rise more than $1 in the morning. They eased slightly later in the day and closed up 76 cents at $7.43 per 1,000 cubic feet.

Wholesale markets offering gas for immediate delivery saw prices rise as well. The average price in the Midwest rose 84 cents, closing at $7.41 per 1,000 cubic feet. A year ago, the wholesale price was $2.17.

The surge in prices was sparked by a report that temperatures in the Midwest and Northeast will be lower than normal in the next few days. The markets were already skittish after a report that the amount of gas in storage was down last week.

The American Gas Association, which compiles the storage report, continues to assert that there is a sufficient supply of gas, even as traders continue to use the figures to help explain the volatility.

"We believe that the gas utilities are in good shape," said a spokeswoman for the American Gas Association in Washington.

Both Kansas Gas Service and Missouri Gas Energy said Monday's spike would not affect customers much immediately. A majority of their gas is purchased in contracts that are priced at the end of the month.

But if the spike in prices continues until then, consumers can expect to pay more to heat their homes. Natural gas is used more to heat homes in the Midwest than any other fuel.

Before Monday's rise in prices, the average natural gas customer could have expected to pay $300 to $350 more this winter. That figure will exceed $400 if prices stay at current levels and there is a normal winter. The average customer is expected to use 90,000 cubic feet of gas this winter, according to the federal Energy Information Administration.

David Sommerer, manager of the gas procurement division at the Missouri Public Service Commission, said regulators were stepping up their review of how utilities bought gas this winter to see whether they had been prudent in getting the best prices possible.

Among the issues that will be reviewed, Sommerer said, is the decision by Missouri Gas Energy not to hedge prices this winter. A hedge is a financial device that can cushion against price spikes.

Missouri Gas decided not to hedge prices after state regulators said it wasn't necessary to approve the hedging. Company officials said the lack of approval made it uncertain that they could recover their hedging costs.

To reach Steve Everly, call (816) 234-4455 or send e-mail to severly@kcstar.com.

http://www.kcstar.com/item/pages/business.pat,business/3774f680.c04,.html

-- Carl Jenkins (somewherepress@aol.com), December 05, 2000


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