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Rise in Natural Gas Prices May Trickle Down to Wisconsin Customers

Posted on: Friday, 2 September 2005, 00:00 CDT

Sep. 1--The skyrocketing cost of natural gas could hit home on electric bills this fall for customers of Wisconsin Power & Light Co. of Madison.

Natural gas prices have closed at all-time highs in futures trading on the New York Mercantile Exchange this week, in response to continued uncertainty over the impact of Hurricane Katrina on oil and natural gas rigs and pipelines.

Citing those higher natural gas costs, Wisconsin Power & Light on Wednesday asked for a $41.4 million, or 4.8 percent, price increase for its electric customers. For the typical residential customer paying $63.03 a month, the increase would be about 3.6 percent, or $2.30 a month.

"The markets were reacting to hurricane predictions even prior to Hurricane Katrina, and we had a very hot summer, which led to more generation by our natural gas peaker plants," said Scott Smith, spokesman for Wisconsin Power & Light. "And very recently, Hurricane Katrina has shut down some of the refineries and disrupted supplies to many parts of the U.S."

Charlie Higley, executive director of the Wisconsin Citizens' Utility Board, a utility watchdog group, said his group is concerned about Wisconsin Power & Light seeking an increase so soon after getting another one approved. The commission finalized a price increase for Wisconsin Power & Light in July.

"It comes on the heels of previous increases," he said. "We're very concerned about consumers' ability to pay their utility bills, especially this winter."

Wisconsin Power & Light's request was filed just days after the state Public Service Commission gave three state utilities, including Milwaukee-based We Energies, permission to eventually pass along to customers higher costs associated with coal-delivery problems in Wyoming.

Train derailments and weather-related track problems in Wyoming have slowed delivery of coal to fuel power plants across the country this summer. Wisconsin utilities have been relying more on their natural gas-fired power plants this summer because they are shutting down coal-fired plants at night and on weekends to conserve coal. That's resulting in higher costs for generating electricity.

Linda Barth, a spokeswoman for the Public Service Commission, said the agency's action doesn't mean that all of those costs will end up being passed on to customers. For instance, if utilities recoup costs from railroads or other sources related to the coal-delivery problems, then the commission won't allow customers to be billed for those costs, she said.

"We will be watching this very closely as this unravels and ensuring that any money that utilities are owed under contractual agreements is used to offset" any increase in rates, she said.

Both the higher coal costs and higher cost of natural gas could result in another increase for We Energies customers on their electric bills, because the price of natural gas is much higher than when the utility first sought an increase that was approved on an interim basis earlier this year.

It's premature to say what impact the coal delivery problems and market price of natural gas will have on We Energies' rates, We Energies Executive Vice President Rick Kuester said Wednesday.

The company plans to provide an updated assessment of natural gas prices in filings with the Public Service Commission next week, in conjunction with hearings taking place in Madison concerning its fuel price case, We Energies said.

The higher price of natural gas hasn't resulted in any supply problems for Wisconsin utilities, utility spokesmen said.

Joe Hollier, a spokesman for El Paso Corp., which operates the ANR Pipeline serving Wisconsin, said the amount of gas flowing on the line was increasing Wednesday. Earlier this week, ANR had reduced the amount of gas flowing through the line, though the reduction didn't have an impact on Wisconsin utilities. ANR was one of three El Paso pipelines in the Gulf of Mexico that were affected by Katrina, though the impact on ANR was less severe than on the other two El Paso pipelines, Hollier said.

The commission is expected to vote on an interim increase for Wisconsin Power & Light customers sometime this month. The increase will be in effect until the commission audits the request. A final decision is expected in early 2006.

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Source: The Milwaukee Journal Sentinel

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