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Utilities Offer Deal to Lock in Price of Gas

Posted on: Friday, 26 August 2005, 21:00 CDT

Aug. 26--Soaring natural gas prices are leaving consumers -- and natural gas utilities -- scrambling to prepare for high prices in the upcoming winter season.

Oklahoma's largest utilities both are offering more options for their consumers this year, largely because of the higher prices.

While most of the programs promise no significant savings, the utilities say the offerings are designed to help consumers better budget for their upcoming winter heating bills, which have been projected to cost 20 percent to 45 percent more than they did one year ago.

"We are very, very specific and very, very careful in offering the plans to make sure our customers understand it is by no means necessarily a cost savings," Oklahoma Natural Gas Co. spokesman Don Sherry said. "It may prove to be that, but it may also prove to be more expensive. The intent is to be a tool for those people who want to know what they will be paying for the gas they use."

ONG on Thursday announced the details of its 2005-2006 Fixed-Price Option, saying customers who choose to participate in the program will pay about $8.39 per dekatherm for all the natural gas they use from November 2005 to October 2006.

To participate, customers must sign up for the plan by Oct. 24.

Customers who choose not to participate in the program will pay a varying amount driven largely by market prices. The program price is significantly higher than last year's fixed price of $7.15 per dekatherm, but well below current market future prices of more than $10.

A dekatherm represents the amount of heat energy released from burning roughly 1,000 cubic feet of natural gas.

In the four years ONG has offered its fixed-price plan, the cost has nearly doubled from $4.35 per dekatherm in 2002-2003. In the first year, participants saved an average of nearly $92 over the pervious year. In the past two years, however, fixed price plan participants paid an average of $10.38 and $13.51 more than ONG customers who did not participate in the plan.

Customers of the state's second-largest natural gas utility, CenterPoint Energy, now also have the option of participating in a similar fixed-price program.

"It's an opportunity for our customers, if they choose, to put a little bit of certainty into the commodity prices on their gas bill," said Bill Phelps, vice president and general manager of CenterPoint Energy's natural gas distribution operations in Oklahoma.

Residential customers who participate in CenterPoint's program will lock in their rates at about $7.14 per thousand cubic feet.

CenterPoint's program also is open to non residential customers. Those that use less than 500,000 cubic feet of natural gas a year have the option to lock in their rates at just less than $7 per thousand cubic feet. Commercial participants using more than 500,000 cubic feet will pay nearly $6.95 per thousand cubic feet.

CenterPoint customers can sign up for the program until 30 days after receiving notice.

Both CenterPoint and ONG said their fixed price amounts reflect efforts to minimize consumer risk by locking in the price on about half the winter natural gas they plan to use. The remaining half is purchased as needed at current market prices.

Natural gas utilities are allowed to profit only on the delivery of gas and not on the price of gas. The companies pass their purchase costs on to customers.

Besides the fixed price plan, both ONG and CenterPoint offer plans that allow consumers to pay an average price throughout the year.

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Copyright (c) 2005, The Daily Oklahoman

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OKE, CNP,

Source: The Daily Oklahoman

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