Natural Gas Rates Expected to Climb
By TUX TURKEL
The dominant distributor of natural gas in southern Maine is asking state regulators for a midsummer rate increase of 17 percent, a prelude to what are expected to be even higher gas costs during the heating season.
Northern Utilities projects that natural gas rates for home customers this winterwill be 15 percent to 20 percent higher than last year. The company also doesn’t rule out the need to seek another rate hike beyond that projected increase.
The increases are necessary, Northern Utilities argues in its filing to the Maine Public Utilities Commission, because the company is not collecting enough money from ratepayers to cover higher- priced gas. Worldwide demand for natural gas is driving up its cost.
Locally, Northern Utilities is experiencing strong demand for its product from homes and businesses fleeing record-high heating oil prices. At oil’s current price, gas would still be much cheaper than home heating oil this winter if regulators approve the projected rate increases for gas.
Even so, Northern’s pending rate case shows how volatile energy prices are today, and why customers need to carefully calculate the benefits of switching fuels, consumer advocates warn.
Northern Utilities has 52,000 customers, split evenly between Maine and New Hampshire. Its Maine territory includes parts of Lewiston-Auburn, Greater Portland and coastal York County.
Rates in Maine ordinarily are set twice a year – summer and winter – based on the differing cost of gas during those periods.
The filing that Northern made last Friday for a rate increase this summer is known as a "mid-course correction" and would come in addition to the winter and summer filings.
Natural gas distribution rates are regulated by the PUC. Companies don’t profit from the cost of the gas they supply, and are typically allowed to pass the expense through to customers. The cost of gas can make up 70 percent of a residential bill.
Gas companies make their money on the distribution portion of the bill.
Under current summer rates, a typical household that uses gas to heat water, cook food and dry clothes is paying $92 a month. If the request is granted by the PUC, rates in August, September and October will increase to $106.33 a month.
That hike would set the stage for higher bills this winter.
Based on its gas cost projections, Northern expects to need a 15 percent to 20 percent rate hike from November to April, said Shelia Doiron, a company spokeswoman.
A typical household that uses gas for heat, as well as water, stove and dryer, paid $249 a month last winter. If rates rise 20 percent, a monthly bill will hit $296 this winter, she said, or $1,776 for the six-month winter period.
The projected rate could have been higher, Doiron said, if Northern hadn’t previously locked in lower gas contracts on the futures market. Even so, there’s no telling whether the cost of gas this winter will lead the company to seek a midcourse correction, she said.
"We need to roll with the prices, so it’s impossible to predict at this point," she said.
Northern is a subsidiary of NiSource Inc., which is being sold to Unitil Corp., a New Hampshire-based holding company. The deal is expected to close this fall, so future rate request decisions will be made by Unitil, Doiron said. A Unitil spokesman couldn’t be reached for comment Monday.
Friday’s rate request came as futures contracts on the New York Mercantile Exchange settled back from record highs. Cooler temperatures, which reduced the demand for gas-generated electricity for air conditioning, contributed to the easing of prices, according to the federal Energy Information Administration.
But long-term trends are less encouraging. Prices are expected to increase through the year and into 2009, the government says.
Those trends make it hard to predict how natural gas will compare in the future to heating oil, which warms eight out of 10 Maine homes. Based on the recent statewide average price of $4.71, oil is roughly twice as expensive as natural gas on a heat-equivalent basis, government calculations show.
Northern’s proposed rate hike provides a useful price signal to home and business owners weighing a switch from oil to natural gas, said Wayne Jortner, a lawyer with the Maine Office of the Public Advocate. Among other things, any conversion needs to figure equipment and fuel costs and a projected payback.
"Every customer really has to do his own arithmetic," he said.
Oil dealers, of course, say oil heat customers should think twice before switching.
Rising natural gas prices aren’t unusual, said Jamie Py, executive director of the Maine Oil Dealers Association. Gas may have a price advantage now, he said, but that has changed periodically over the years.
The PUC will be reviewing Northern’s request for a mid-summer rate increase and is expected to rule by the end of the month, said Fred Bever, the agency’s spokesman. Mid-course corrections involving fuel costs typically are approved by regulators, he said.
Staff Writer Tux Turkel can be contacted at 791-6462 or at:
tturkel@pressherald.com
[Sidebar]
NATURAL GAS COSTS
UNDER CURRENT SUMMER RATES, a typical household that uses gas to heat water, cook food and dry clothes pays $92 a month.
IF THE 17 PERCENT REQUEST is granted, the monthly bill will rise to $106.33 for August through October.
NORTHERN IS projected to need a winter rate that is 15 percent to 20 percent higher than last year.
LAST WINTER, a typical home using gas for heat, water, cooking and clothes drying paid $249 a month.
IF RATES RISE 20 PERCENT, that typical monthly bill will hit $296, or $1,776 for the six-month winter period.
Originally published by By TUX TURKEL Staff Writer.
(c) 2008 Portland Press Herald. Provided by ProQuest Information and Learning. All rights Reserved.