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Northwest Consumers to See Higher Natural Gas Costs

Posted on: Wednesday, 10 August 2005, 15:00 CDT

Consumers around the Pacific Northwest should expect to see higher natural gas bills this coming winter as local utilities pass through the increased cost of acquiring gas supplies for their customers' use.

The average wholesale price for natural gas has increased over the previous year every year since 2002, due primarily to a tight balance between growing demand and available supply. The higher gas costs will add to the bills consumers pay this winter. "Pacific Northwest utilities will soon request permission from their state regulators to pass along the higher wholesale costs they are paying to purchase natural gas supplies for their customers," said Dan Kirschner, executive director of the Northwest Gas Association.

Natural gas utilities in the Pacific Northwest are not allowed to make a profit on the natural gas commodity. Utility profits are highly regulated through the process of setting rates and come from the service of delivering gas to consumers. The cost of the commodity itself is passed through directly, without markup, to consumers. In fact, local utilities employ a number of strategies to minimize the impact of higher gas prices. "The region's utilities buy some gas off-season when prices are lower and store it in special underground facilities until its needed. They also apply special gas purchasing strategies to reduce the volatility of gas costs for their customers," said Kirschner.

Natural gas continues to be popular for use in homes, schools, businesses, factories and electric power-generation because it is efficient, clean, and reliable. However, natural gas production in recent years has struggled to keep pace with increasing demand. The market price of natural gas reflects the extremely tight balance between natural gas supply and demand. Record crude-oil prices also are contributing to the jump in natural gas prices.

Kirschner noted that the addition of significant new pipelines in recent years means that Northwest consumers now compete with more populous areas in the mid- and southwest for natural gas supplies from the Rockies and Canada. "The Pacific Northwest is no longer an island separate from the demands of others. We're more and more connected to natural gas markets all across North America." As a consequence, Northwest consumers can expect to be increasingly affected by extreme weather and other factors affecting the natural gas prices that occur outside the region.

According to Kirschner, the Energy Policy Act of 2005 recently passed by Congress should help the situation. "There is plenty of natural gas in the ground to meet our needs for many years. The Energy Policy Act will help encourage moving more of that gas out of the ground and to where it is needed." Among other provisions the Act streamlines permitting processes, provides greater regulatory certainty, establishes incentives for increased natural gas production and focuses on diversifying electrical generation to help ease natural gas demand. Kirschner continued by saying that relief will not come immediately. "We expect the natural gas related provisions of the Energy Policy Act to make headway against sustained higher prices, but it won't happen overnight. Just like building a house or a highway, energy projects take time to plan and put into place."

The websites of Northwest utilities contain valuable information for consumers about steps they can take now to reduce their natural gas usage and soften the effect of higher gas costs on their winter heating bills. Many sites also provide links to community agencies that may provide bill-paying assistance to lower-income customers. Links to the respective utilities can be found on the NWGA website (www.nwga.org), as well as details about which utility serves what area. In addition, the NWGA is developing a white paper that describes the mechanics of wholesale natural gas prices in greater depth. The white paper will be available on the NWGA website or by calling the NWGA office directly (503-624-2160).

About the NWGA

The NWGA is a trade organization that represents the interests of the natural gas industry in the Pacific Northwest. Its members include six natural gas utilities serving communities throughout Idaho, Oregon, Washington and British Columbia, as well as three transmission pipelines that move natural gas from supply basins into and through the region. NWGA members include:

UTILITIES:

-- Avista Corporation (www.avistacorp.com)

-- Cascade Natural Gas Corporation (www.cngc.com)

-- Intermountain Gas Company (www.intgas.com)

-- NW Natural (www.nwnatural.com)

-- Puget Sound Energy (www.pse.com)

-- Terasen Gas (www.terasengas.com)

PIPELINES:

-- Duke Energy Gas Transmission (www.duke-energy.com)

-- TransCanada GTN System (www.gastransmissionnw.com)

-- Williams NW Pipeline (www.wiliams.com)

Source: Business Wire

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