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Texans Won't Just Feel Pain at the Pump, Officials Say

Posted on: Saturday, 17 September 2005, 00:00 CDT

Sep. 15--Texans, already paying more at the gasoline pump, can expect natural gas and electricity bills to rise sharply this winter.

Already, natural gas utility Atmos Energy says prices in October will be 20 percent higher than in September, largely due to the rise in market prices in the wake of Hurricane Katrina.

TXU Corp. uses natural gas to generate about half of the electricity it provides. The company said Wednesday it agreed to limit some of the potential rate increase, but its customers can expect about a 12 percent hike starting in November.

"Customers should expect to pay more this winter to heat their homes," said Atmos spokesman Ray Granado. Natural gas prices "were going up anyway, but then Katrina happened."

Natural gas prices had already more than doubled in the last year before Hurricane Katrina hit the Gulf Coast and knocked out a chunk of energy supply. That caused prices to rise even higher. On Wednesday, natural gas ended up 40 cents at $11.17 per million British thermal units.

The Department of Energy's Energy Information Administration predicted last week that household expenditures for natural gas will rise around 71 percent on average this winter compared with last year. Local officials say the rise in Texas probably won't be so dramatic, but could be substantial.

Some experts say the only way consumers can save money is to cut back on energy use.

Clearly, Texans who rely on gas to heat their homes will see their gas bills rise. Around 75 percent to 80 percent of an Atmos customer's bill reflects the cost of natural gas. By law, Atmos isn't allowed to make a profit on that gas but must charge customers exactly what the company pays.

Electric bills will probably rise as well, though some providers agreed to give natural gas markets some time to retreat from Katrina highs before setting long-term rates.

The Texas Public Utility Commission held discussions last week on whether to adjust rate rules to mitigate the effects of price spikes related to the hurricane. In response, TXU Energy and other incumbent power providers agreed to delay rate increase requests until next month.

TXU said Wednesday it struck an agreement with the PUC and consumer advocates to hold off until early October to file the rate increase request.

Under the deal, those rates wouldn't actually go into effect until January. Until then, TXU would use pre-Katrina natural gas prices to set electricity rates 12 percent higher. Natural gas prices

About half of the state's electricity is generated with natural gas. The PUC has pegged electricity rates for the incumbents to the market price for natural gas, a move that has drawn criticism for years because electricity from TXU's coal and nuclear plants is less expensive.

What's causing natural gas prices to escalate, aside from the hurricane, is higher demand around the world and some supply restrictions.

Supply is restricted because, in the past, natural gas prices weren't high enough to justify the expense of drilling for more. Current high gas prices will only stimulate drilling for more supply if the prices are sustained.

"The supply of natural gas is very tight at what I would call the historic prices we've seen for natural gas," said Greg Aliff, head of Deloitte Services LP energy and resources practice. "Most believe that natural gas can be a significant player, but only if the prices are sustained at a level high enough that would sustain the investment necessary for the domestic supplies."

Hurricane Katrina aggravated the supply crunch by damaging production facilities and pipelines that deliver natural gas to utility companies, causing prices to spike.

That may disrupt the industry's cycle of storing natural gas during the autumn for use in the winter, said Peyton Feltus, president of Randolph Risk Management. Need for conservation

At this point, the only immediate way to trim energy costs is to stop using so much energy, Mr. Feltus said.

"Conservation is the consumer's most powerful tool, and it is extremely powerful," he said, adding: "Unfortunately, price is going to have even us Texans take conservation seriously."

If every American sets his thermostat down a few degrees this winter, the country could easily make up for the natural gas production lost to Katrina, he said.

And Mr. Granado with Atmos Energy said customers that turn down the thermostat 10 degrees when they're away from home can cut their gas bills by 10 percent.

Staff writer Sudeep Reddy contributed to this report.

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ATO, TXU,

Source: The Dallas Morning News

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