Vectren chief: Worst is yet to come

Natural gas bills to go even higher

-------------------------------------------------------------------------------- By BYRON ROHRIG, Courier & Press staff writer (812) 464-7426 or blrohrig@evansville.net

Join us in a Town Hall Forum to discuss the situation with a group of panelists including representatives from SIGECO and Western Kentucky Gas, Indiana House members Veneta Becker and Dennis Avery, Community organizations who are helping find solutions, and others. The Forum will air Live on WNIN Thursday, February 8th, at 7pm. More information is available at Big Chill, High Bill

-------------------------------------------------------------------------------- This month’s average natural gas bill, based on 200 therms, is $154.12, a 60 percent increase over last year’s average bill in February of $92.47.

At the end of January, Vectren Corp. was financing $45 million in “under-recovered” natural gas costs. As a result, subsidiary Southern Indiana Gas & Electric Co. will continue to adjust customer bills upward until it catches up with this winter’s historic spike in natural gas costs, Vectren Chief Niel Ellerbrook said Tuesday.

Ellerbrook’s message to 180 Evansville Rotary Club members — that it’s going to get worse before it gets better — was similar to the picture Vectren officials painted last week at a press briefing inside the company’s Evansville headquarters.

Ellerbrook said the average residential customer using 200 therms per month paid $134.82 for natural gas in January, compared with $92.94 in January 2000 — a 45 percent increase. This month’s average bill, based on 200 therms, is $154.12, a 60 percent increase over last year’s “average bill” in February of $92.47.

Because Vectren buys gas from suppliers and by law takes no profit from the huge price jumps in the unregulated commodity, Ellerbrook said the company has not gained, but has incurred additional costs in unpaid customer bills and inventory.

Additional profit did come from the jump in demand because of this heating season’s unusually cold weather, especially in December. But a margin of 25 cents per decatherm of natural gas has remained constant, he said.

Plummeting temperatures this winter created a marked contrast with the two previous winters, which were 12 percent to 14 percent warmer. So this year’s bills have been made all the worse with heightened demand for gas, which now costs much more.

But “significant growth” in demand for natural gas has been a major factor in a market price jump that saw gas prices in December soar briefly to as much as 500 percent higher than at the end of 1999 — $2.12 per decatherm in late 1999 compared to a December 2000 price at one point reaching $10.

Ellerbrook said demand for natural gas over the next 15-20 years will increase at least 25 percent, “and maybe as much as 40 to 50 percent.” Half of the consumption increase, he said, will be because of a steep increase in the number of gas-fired electrical generating plants.

“Absence of a national energy policy is a contributor — perhaps the major contributor” to natural gas woes, Ellerbrook said.

Ellerbrook applauded President Bush’s support for opening federal lands to natural gas exploration — necessary, Ellerbrook said, to get supply up to a level where prices can begin to ease off.

He predicted the electrical-supply crisis in California will join the zoom in natural gas prices to “spur a whole new look at how we balance supply, demand and the environment.”

Ellerbrook acknowledged environmentalists’ concerns, but said coal, “our most abundant energy source, should play a role” in providing U.S. energy needs. “We’ll see (coal) become a more visible part of the solution long-term,” he said.

Natural gas prices will stay high for the rest of 2001, he predicted, but should fall off some early next year as increased production — encouraged by the current price spiral — begins to offset increased demand.

http://www.courierpress.com/cgi-bin/view.cgi?200102/07+vecren020701_business.html+20010207

-- Martin Thompson (mthom1927@aol.com), February 08, 2001