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Region's Natural Gas Utilities Hiking Prices Significantly

Posted on: Tuesday, 4 October 2005, 00:01 CDT

By Pamela Gaynor, Pittsburgh Post-Gazette

Oct. 1--The region's three largest natural gas utilities yesterday announced increases in gas costs that are expected to push average monthly home heating bills up as much as 45 percent from a year ago.

The new prices, which are up an average $33 to $46 a month from a year ago depending on the utility, take effect today.

All of the utilities -- Columbia Gas of Pennsylvania, Equitable Gas Co. and Dominion Peoples Gas -- blamed the increases on tumultuous energy markets that began dominating headlines even before back-to-back hurricanes disrupted oil and gas production in the Gulf of Mexico.

The magnitude of the changes, while likely to strap many customers who already have been reeling from gasoline price increase, could have been predicted, said Pennsylvania Consumer Advocate, Sonny Popowsky.

"Even going into the hurricane season, the prices were at extremely high levels," he said.

Popowsky noted that 12-month price contracts for gas on the New York Mercantile Exchange had hit $8.61 per thousand cubic feet in early August, up from $3.33 three years ago. "By the end of last week, it was $10.83 cents and this week it's even higher."

For customers served by Columbia, the region's largest gas utility, gas bills are expected to jump the most, up $46 or 45 percent to an average $148 a month from about $102 in October of last year.

Equitable's customers will see the highest monthly bills, at roughly $153 compared with $120 a year ago, though the $33 increase represents the smallest change -- up 28 percent from October 2004.

Customers of Dominion Peoples will see average monthly bills rise $43, or 43 percent from a year ago to $143.

Increases in the average bills, which reflect both gas costs and service charges for a typical home that uses about 100,000 cubic feet of gas a year, actually are tamer than the gas price increases the utilities announced because there were no hikes in service charges.

Columbia's so-called "gas cost recovery rate" alone, for example, jumped to $13.85 per thousand cubic feet, up 85 percent from a year ago and 63 percent from the $8.17 per thousand cubic feet the utility had been charging customers between July 1 and the end of last month.

Comparable residential gas charges from utilities across the Mid-Atlantic states are expected to average $15.98 through the end of December, assuming recovery from hurricanes that hit the Gulf states goes as planned, according to the U.S. Energy Information Administration. Mid-Atlantic gas costs averaged $12.90 per thousand cubic feet in the final quarter of last year, the federal agency said.

Pennsylvania utilities make their profits strictly from providing service and any increase they seek in those service charges must win approval from state regulators. None of the region's three largest utilities has sought a service rate increase since 1997.

Utilities in Pennsylvania are permitted to charge customers only the actual cost of gas, with no markup and are allowed to change their so-called "gas cost recovery rates" quarterly to reflect market conditions.

Although the Energy Information Administration predicted gas costs in the wake of the hurricanes would rise steadily through the third quarter of next year before dropping in the final three months of 2006, utility officials in the region said it was difficult to project where rates may go.

"I wish we knew the answer," said Joseph A. Gregorini, manager of regulatory and pricing issues for Dominion Peoples. "From what we're reading, a lot is going to depend on how quickly the disruption caused by the hurricanes is corrected and how the winter [weather] is."

A fast recovery from the storms, a mild winter, or both could bring prices back down when utilities again adjust their rates at the beginning of January, he said.

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Copyright (c) 2005, Pittsburgh Post-Gazette

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Source: Pittsburgh Post-Gazette

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