Huge Gas Bills Stun D.C. Area

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Huge Gas Bills Stun D.C. Area

By Peter Behr and Sabrina Jones Washington Post Staff Writers Sunday, February 4, 2001 ; Page A01

The gas heating bills that arrived a week ago at a new Manassas subdivision sent Kelly Chiarini and her neighbors reeling. She had been expecting a bigger bill from Columbia Gas, but not one for $750 -- more than three times the October statement.

"It was cardiac arrest," said Chiarini, a computer sales representative who lives in Manassas with her husband in a four-bedroom home.

There have been no rolling electricity blackouts or flickering streetlights in the Washington area, unlike California. But an energy shock wave has rolled through the region all the same, through the gas meter.

Just a month ago, Washington area consumers were warned of 50 percent increases in natural gas prices. The reality has been far worse.

Consumers' gas bills for December and January more than doubled from a year ago, according to Washington Gas Light Co. and Columbia Gas. Baltimore Gas & Electric said bills for December service were 70 percent higher in than December 1999 and some additional December charges will show up in future bills. In the Washington region, about 850,000 households use natural gas to heat their homes.

The unprecedented gas bills are the result of two intersecting events -- unusually cold weather and a nationwide scarcity of natural gas.

A slowdown in gas exploration in the second half of the 1990s, when prices were low, was accompanied by a big jump in demand because of gas's growing role as the fuel of choice for new electricity plants. So this winter, nationwide inventories of stored gas have been as much as 30 percent below normal.

The early onset of cold weather in November sent customer demand soaring, driving wholesale prices up to record levels, four times those of a year ago.

By December, natural gas sold daily at "spot" prices at major terminals averaged nearly $10 a thousand cubic feet, compared with a $2.50 average for 1995 through 1999. Daily prices reached $20 per thousand cubic feet in New York City this winter and more than $50 in parts of California. In California, high gas prices are a key factor in the state's huge increases in electricity costs.

Like other utilities, Washington Gas does not make more profit when gas prices increase -- it passes those costs on dollar for dollar to customers. But it does profit when cold weather leads to more gas use.

And because the Washington area's gas companies buy most of their product at current market prices, the higher charges moved directly to their customers'' bills.

"What's different this winter is our need to go into the daily market" for more gas supplies, said Adrian P. Chapman, Washington Gas vice president for energy purchase.

Washington Gas's strategy has been to rely on spot prices to determine the costs of the gas it buys, rather than "hedging" its requirements by buying contracts that lock in future gas deliveries at predetermined prices, Chapman said.

The approach worked well in past years when prices were low.

But this year, the strong demand for gas has created a sellers' market for energy companies such as Duke Energy, Dynegy Inc., Koch Industries Inc., Enron, Conoco, Ashland Inc. and Mirant Corp. (formerly Southern Energy Inc.) Their prices escalated.

The shortage of natural gas also has attracted speculators who buy and sell gas contracts on the New York Mercantile Exchange. Higher market prices there have contributed to higher spot prices paid by utility companies. "Any little thing moves the market when it is stretched this thin," said Kelley Doolan, chief editor of Inside FERC's Gas Market Report, a Platts publication that surveys natural gas prices.

The trading "pushes the prices up," said John Perrone, managing director for Baltimore Gas & Electric's new retailing subsidiary. "That's exactly what happened."

In one typical case, the owner of a 2 1/2-story Capitol Hill town house got a $686 gas bill for December, more than twice the amount for December 1999. The customer's gas charge more than doubled as well, to 85 cents a therm, a standard utility heating unit. (A $10 spot price for natural gas is equivalent to about $1 per therm.)

For consumers, the escalation in gas bills is a stark exposure to the volatility that energy deregulation can bring, when shortages give producers and marketers the leverage to push through big price increases.

Wholesale natural gas prices have been fully decontrolled since 1993. Gas charges that customers receive are still subject to regulatory review, but companies are allowed to pass through higher wholesale prices.

These higher bills are particularly painful for those on fixed incomes.

Vera Rector, 45, who has glaucoma and other illnesses and receives disability pay, has had to juggle her high energy charges with the other expenses of paying for car insurance, medication and food for herself, her 16-year-old daughter and her 4-month-old grandson. She uses food stamps, lives in government-assisted housing, and has received money from Fairfax County agencies to help her pay her bills, but it's still not enough.

"Even with that help, I'm still behind," Rector said.

In December, the gas bill from Dominion Power for her three-level Burke town house reached more than $200, too much for her to pay on time with her income of $601 a month. After her landlord put in a new furnace, her bill declined this month to about $110, but she still was behind in her payments.

Although areas of her home are so cold she doesn't go into them, Rector tries not to turn her heat up much. "We just basically stay up in the bedroom area," Rector said. "The top level stays the warmest."

Mark Wolfe, president of the National Energy Assistance Directors' Association said that while more federal home heating assistance is available this year than last, it may not be enough to keep up with rising costs of natural gas and other fuels, particularly for the poor, who pay up to 20 percent of their income for gas and electricity.

"If you're poor, there's no way you could have planned for this," Wolfe said. "People skimp on medicine, they skimp on food, they really cut back. We're worried we're going to see more [energy] shutoffs. It's a sign that people are having trouble coping."

Whatever their circumstances, gas customers have deluged utilities with complaints about their bills.

In other winters, Washington Gas received about 5,000 customer phone calls a day. Now the number is about 15,000, spokesman Tim Sargeant said. "We're bringing in more people to staff the telephone service lines," he said. "And we're asking for patience."

Milder weather in January eased the gas scarcity somewhat and spot prices have declined to about $6 per thousand cubic feet.

But, Doolan said, "there are many weeks between now and April. If it's bitterly cold again, we'll be back where we were and maybe higher."

Even with a big increase in new drilling, triggered by higher prices, gas supplies will be tight for the rest of the year, the Energy Department predicts. That could push gas bills next winter back up to where they are now, the department said.

© 2001 The Washington Post

http://www.washingtonpost.com/wp-dyn/articles/A23474-2001Feb3.html By Peter Behr and Sabrina Jones Washington Post Staff Writers Sunday, February 4, 2001 ; Page A01

The gas heating bills that arrived a week ago at a new Manassas subdivision sent Kelly Chiarini and her neighbors reeling. She had been expecting a bigger bill from Columbia Gas, but not one for $750 -- more than three times the October statement.

"It was cardiac arrest," said Chiarini, a computer sales representative who lives in Manassas with her husband in a four-bedroom home.

There have been no rolling electricity blackouts or flickering streetlights in the Washington area, unlike California. But an energy shock wave has rolled through the region all the same, through the gas meter.

Just a month ago, Washington area consumers were warned of 50 percent increases in natural gas prices. The reality has been far worse.

Consumers' gas bills for December and January more than doubled from a year ago, according to Washington Gas Light Co. and Columbia Gas. Baltimore Gas & Electric said bills for December service were 70 percent higher in than December 1999 and some additional December charges will show up in future bills. In the Washington region, about 850,000 households use natural gas to heat their homes.

The unprecedented gas bills are the result of two intersecting events -- unusually cold weather and a nationwide scarcity of natural gas.

A slowdown in gas exploration in the second half of the 1990s, when prices were low, was accompanied by a big jump in demand because of gas's growing role as the fuel of choice for new electricity plants. So this winter, nationwide inventories of stored gas have been as much as 30 percent below normal.

The early onset of cold weather in November sent customer demand soaring, driving wholesale prices up to record levels, four times those of a year ago.

By December, natural gas sold daily at "spot" prices at major terminals averaged nearly $10 a thousand cubic feet, compared with a $2.50 average for 1995 through 1999. Daily prices reached $20 per thousand cubic feet in New York City this winter and more than $50 in parts of California. In California, high gas prices are a key factor in the state's huge increases in electricity costs.

Like other utilities, Washington Gas does not make more profit when gas prices increase -- it passes those costs on dollar for dollar to customers. But it does profit when cold weather leads to more gas use.

And because the Washington area's gas companies buy most of their product at current market prices, the higher charges moved directly to their customers'' bills.

"What's different this winter is our need to go into the daily market" for more gas supplies, said Adrian P. Chapman, Washington Gas vice president for energy purchase.

Washington Gas's strategy has been to rely on spot prices to determine the costs of the gas it buys, rather than "hedging" its requirements by buying contracts that lock in future gas deliveries at predetermined prices, Chapman said.

The approach worked well in past years when prices were low.

But this year, the strong demand for gas has created a sellers' market for energy companies such as Duke Energy, Dynegy Inc., Koch Industries Inc., Enron, Conoco, Ashland Inc. and Mirant Corp. (formerly Southern Energy Inc.) Their prices escalated.

The shortage of natural gas also has attracted speculators who buy and sell gas contracts on the New York Mercantile Exchange. Higher market prices there have contributed to higher spot prices paid by utility companies. "Any little thing moves the market when it is stretched this thin," said Kelley Doolan, chief editor of Inside FERC's Gas Market Report, a Platts publication that surveys natural gas prices.

The trading "pushes the prices up," said John Perrone, managing director for Baltimore Gas & Electric's new retailing subsidiary. "That's exactly what happened."

In one typical case, the owner of a 2 1/2-story Capitol Hill town house got a $686 gas bill for December, more than twice the amount for December 1999. The customer's gas charge more than doubled as well, to 85 cents a therm, a standard utility heating unit. (A $10 spot price for natural gas is equivalent to about $1 per therm.)

For consumers, the escalation in gas bills is a stark exposure to the volatility that energy deregulation can bring, when shortages give producers and marketers the leverage to push through big price increases.

Wholesale natural gas prices have been fully decontrolled since 1993. Gas charges that customers receive are still subject to regulatory review, but companies are allowed to pass through higher wholesale prices.

These higher bills are particularly painful for those on fixed incomes.

Vera Rector, 45, who has glaucoma and other illnesses and receives disability pay, has had to juggle her high energy charges with the other expenses of paying for car insurance, medication and food for herself, her 16-year-old daughter and her 4-month-old grandson. She uses food stamps, lives in government-assisted housing, and has received money from Fairfax County agencies to help her pay her bills, but it's still not enough.

"Even with that help, I'm still behind," Rector said.

In December, the gas bill from Dominion Power for her three-level Burke town house reached more than $200, too much for her to pay on time with her income of $601 a month. After her landlord put in a new furnace, her bill declined this month to about $110, but she still was behind in her payments.

Although areas of her home are so cold she doesn't go into them, Rector tries not to turn her heat up much. "We just basically stay up in the bedroom area," Rector said. "The top level stays the warmest."

Mark Wolfe, president of the National Energy Assistance Directors' Association said that while more federal home heating assistance is available this year than last, it may not be enough to keep up with rising costs of natural gas and other fuels, particularly for the poor, who pay up to 20 percent of their income for gas and electricity.

"If you're poor, there's no way you could have planned for this," Wolfe said. "People skimp on medicine, they skimp on food, they really cut back. We're worried we're going to see more [energy] shutoffs. It's a sign that people are having trouble coping."

Whatever their circumstances, gas customers have deluged utilities with complaints about their bills.

In other winters, Washington Gas received about 5,000 customer phone calls a day. Now the number is about 15,000, spokesman Tim Sargeant said. "We're bringing in more people to staff the telephone service lines," he said. "And we're asking for patience."

Milder weather in January eased the gas scarcity somewhat and spot prices have declined to about $6 per thousand cubic feet.

But, Doolan said, "there are many weeks between now and April. If it's bitterly cold again, we'll be back where we were and maybe higher."

Even with a big increase in new drilling, triggered by higher prices, gas supplies will be tight for the rest of the year, the Energy Department predicts. That could push gas bills next winter back up to where they are now, the department said.

© 2001 The Washington Post

http://www.washingtonpost.com/wp-dyn/articles/A23474-2001Feb3.html

-- Martin Thompson (mthom1927@aol.com), February 04, 2001


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