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New Jersey Heating Bills to Soar With Fuel-Oil Price Rise

Posted on: Thursday, 18 August 2005, 21:00 CDT

Aug. 18--It's going to cost a lot more to keep warm this winter.

Fuel oil prices have risen nearly 49 percent in the past 12 months to a record $2.41 a gallon in North Jersey. And most of the state's gas heat customers learned Wednesday that they'll be paying more, too.

That's because the New Jersey Board of Public Utilities granted Public Service Electric and Gas Co. a 10.6 percent rate increase, effective Sept. 1, reflecting sharply higher commodity prices.

People are being hit with a "triple whammy," said David Fox, executive director of the Campaign for Home Energy Assistance. The Washington-based group advocates for more federal money to help needy people pay home heating and cooling bills.

This summer's string of 95-degree days in many parts of the country caused greater use of air conditioners, producing high electricity bills that many customers have yet to pay.

Prices at the pump also are skyrocketing, averaging 64 cents a gallon higher this week in North Jersey than a year ago.

Now big heating bills loom.

"I see a very difficult winter ahead," Fox told The Associated Press.

With the increase granted by the BPU, the bill for a typical PSE&G gas-heat customer -- one using 200 therms a month -- will rise to $252 a month during the heating season, PSE&G spokeswoman Karen Johnson said.

That's about $24 a month more than last winter and $152 more for the year, Johnson said.

The increase could have been bigger, but PSE&G has been able to lock in prices through its hedging program, said Frederick Lark, the utility's vice president for business analysis.

"Fortunately, we've been able to minimize the increase for our customers by buying gas at more competitive prices," Lark said. "We have hedged two-thirds of this winter's gas supply at prices below current quotes for winter gas supply."

The federal Energy Information Administration estimates that natural gas could cost more than $10 per thousand cubic feet by January.

Natural gas, which cost around $6 last August, closed at $9.36 Wednesday on the New York Mercantile Exchange, down 3.1 cents. Heating oil was up a fraction, settling at just under $1.79 a gallon on the Nymex.

As a regulated utility, PSE&G makes money on the delivery of gas and service, but nothing on the natural gas itself. Instead, it charges customers what its pays for gas, and the rate increase allows the company to recover its higher costs.

When PSE&G filed for the rate increase in June, wholesale prices for natural gas had increased about 17 percent in the previous three months, Lark said. Natural gas prices have since continued to increase "and are still very unpredictable," he said.

PSE&G is New Jersey's largest utility, with more than 2 million customers, and by far the dominant provider of natural gas in Bergen and Passaic Counties.

Even with the increase, PSE&G says it still charges less for gas supply than the state's three other natural gas utilities.

Consumers are not the only ones hurt by the volatility in the commodity markets, said Eric DeGesero, executive vice president of the Springfield-based Fuel Merchants Association of New Jersey.

He said fuel oil dealers also are having a tough summer. This is the time of year when dealers encourage customers to commit for the year and lock in rates to avoid midwinter shock.

But customers have been holding back, DeGesero said.

"Everyone wants to buy at the bottom of the market, to get the most for the least," he said.

But that's difficult to do when the cost of heating oil in North Jersey is up 11 cents since mid-July and 79 cents since August 2004, according to The Record's Marketbasket Survey.

"There's interest in hedging on the parts of all parties, but they're waiting," DeGesero said. "Here we are in August, and everyone talks about it in the abstract, but no one wants to commit to price. They want to wait to see if prices come down.

A little more than half of U.S. homes use natural gas for heating; the heaviest concentration is in the Midwest.

About 9 percent use fuel oil, mostly in the Northeast. Most of the rest use electricity, with a small number relying on propane. The cost of those fuels is rising, too.

The recently enacted energy bill authorizes $5.1 billion a year in government energy assistance. But Congress traditionally has funded much less than what is authorized.

Fox said there will not be enough assistance to meet demand. "People will have to be turned away," he said.

This story contains information from The Associated Press.

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Copyright (c) 2005, The Record, Hackensack, N.J.

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Source: The Record - Hackensack, New Jersey

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