Florida: Peoples Gas seeks huge leap in rates

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Peoples Gas seeks huge leap in rates

If the PSC agrees, the average bill would go up about 30 percent as the utility moves to recover the skyrocketing cost of natural gas. By STEVE HUETTEL

© St. Petersburg Times, published January 31, 2001

TAMPA -- Customers who hoped to dodge high utility bills by using natural gas are in for a shock.

The state Public Service Commission's staff is recommending that Peoples Gas of Tampa and seven other Florida companies receive huge rate increases next month to recover the skyrocketing cost of natural gas.

Peoples Gas, which serves about 75,000 Tampa Bay area customers, will boost its average monthly bill by about 30 percent if the commission approves its request Feb. 6, spokeswoman Laura Plumb said.

That will increase the average bill from $36.79 to $48.01 a month. Already, the PSC has allowed Peoples two fuel-cost increases since summer. As recently as August, the average bill was $30.39.

The price that its supplier charged Peoples for natural gas jumped 50 percent over the past year, Plumb said. Even after increasing consumer bills, the company, a subsidiary of Tampa-based TECO Energy, lost $35-million selling natural gas to 260,000 Florida customers in December and January, she said.

"Prices today are not indicative of what it costs to supply natural gas," she said. "We think the market will correct itself."

Industry observers began warning of natural gas shortages and price spikes last summer as reserves dwindled.

As prices dipped in 1998 and 1999, gas suppliers had no incentive to drill new wells. Exploration picked up in late 1999. But it takes six to 18 months for new production to reach pipelines. Prices doubled from July to December due to short supplies and high demand sparked by frigid winter weather.

Florida gas companies make money transporting natural gas to customers. They can't mark up their cost from suppliers, which makes up about a third of a customer's bill. The PSC sets a cap on how much companies can charge for the commodity.

If the PSC approves the proposed cap increase, Plumb said, Peoples will begin charging the maximum allowable fuel fee immediately to make up for losses in previous months.

Gas companies can charge less than the cap and even lower the cap simply by writing a letter to the PSC. Peoples expects the price will drop in coming months but can't predict when, Plumb said.

Wayne Makin, a PSC economic analyst, said supplier prices already have started to ease, but utilities such as Peoples must recoup losses.

The price spikes particularly hurt smaller companies that had to borrow money to buy natural gas, he said. Their ratepayers will end up paying interest costs as well, he said.

"I've been in this 20 years, and I've never seen anything like this," Makin said of the price volatility. "This is like buying pork bellies."

-- Contact Steve Huettel at huettel@sptimes.com or (813) 226-3384.

http://www.sptimes.com/News/013101/news_pf/Business/Peoples_Gas_seeks_hug.shtml

-- Martin Thompson (mthom1927@aol.com), January 31, 2001


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