National Fuel’s Gas Charges to Rise 5%

By David Robinson

There won’t be any relief from this winter’s record-high heating bills this month.

In fact, National Fuel Gas Co. will be charging its residential customers 5 percent more this month than it did during December as the year-long surge in natural gas commodity prices leaves the utility’s rates 35 percent higher than they were a year ago.

As a result, National Fuel officials hiked their forecast for heating costs this winter, with a typical residential customer now expected to spend $1,280 between November and March. While that 36 percent increase still is within the 30 percent to 40 percent range that company officials have been predicting since last fall, it’s about $336 more than last year and 23 percent higher than the previous record of $1,043, set during the especially cold winter of 2000-01.

"Certainly, people are struggling," said Julie Coppola Cox, a National Fuel spokeswoman. "But the prices are still well within the range we had expected."

While natural gas commodity prices have tumbled by 39 percent since hitting a record high on Dec. 13, the impact on National Fuel’s customers is limited. That’s because the utility purchases much of the gas it expects to supply during the winter months either in advance or through fixed-price contracts in a strategy designed to guarantee adequate supplies and smooth out some of the big price swings that can occur in the commodity markets.

The average January price of $16.14 per 1,000 cubic feet is the

third-highest monthly rate ever charged by National Fuel, trailing only the rates from October and November of last year that topped $19, according to company statistics.

The higher rate in January also comes at a bad time because gas use this month by residential customers typically is the highest of the five-month heating season that runs from November to March. Nearly 91 percent of the households in Erie County use natural gas for heating, according to the U.S. Census Bureau.

The one bit of good news on this winter’s heating costs is that temperatures since November have been averaged about 2 percent above normal, which means furnaces haven’t had to run quite as much as they normally would, reducing gas consumption. December was a little less than 1 percent colder than normal, while November was almost 9 percent milder than usual, according to the National Weather Service in Cheektowaga.

As a result, the average National Fuel residential customer’s bill in November shot up by nearly 40 percent to $148.20 from $106 the previous year, even though temperatures were almost 5 percent warmer than they were in November 2004. December bills are expected to average about $234, up 33 percent from a year ago as temperatures were 7 percent colder than they were in December 2004.

Natural gas commodity prices have soared more than five-fold over the past five years. Demand for the fuel has grown because of its increased use by businesses and factories as the economy strengthened and new power plants that burn natural gas came on line.

At the same time, gas production has struggled to keep up. Even before Hurricanes Katrina and Rita hit in late August and September, natural gas commodity prices last year were up by almost 60 percent. Most of the price spike that followed the Gulf hurricanes has been wiped out by the plunge in commodity prices over the last three weeks.

But supplies remain tight, especially since slightly less than 20 percent of the daily gas production in the Gulf of Mexico remains shut down, according to the U.S. Minerals Management Service.

Yet because the winter across the country has been relatively mild so far, natural gas supplies remain robust, which is easing fears of a shortage. Gas inventories are 6.8 percent above the average for the last five years, according to the U.S. Department of Energy.

"The prospect for lower heating demand is helping to ease the market’s winter supply concerns," said Robert Feick, an analyst at National Bank Financial in Canada, in a note to investors Wednesday. "Despite inventories being well stocked, the prospect that winter demand could tighten supplies before Gulf production can be fully restored is keeping the market nervous."

e-mail: drobinson@buffnews.com