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Prices Cooling for Natural Gas: Atmos Bills Nearing Levels of Last Year, May Subside Further

Posted on: Saturday, 4 March 2006, 15:00 CST

By Elizabeth Souder, The Dallas Morning News

Mar. 4--Natural gas prices continue to drop, bringing North Texans a reprieve on their energy bills as spring approaches.

Atmos Energy Corp. will charge $6.59 per thousand cubic feet of gas in March, down from $8.02 in February, and getting closer to last year's price of $5.25.

"I wouldn't say it's as good as we're going to get," said Allen Mesch, president of PetroStrategies Inc. in Dallas.

"For the short term, I would say that we would see prices continue to be lower. The prices in the summertime are historically lower than in the winter," he said.

But folks who have gas wells in their back yards shouldn't fret. Experts say prices may slide into summer because gas companies have put a lot of natural gas into storage, but long-term demand for natural gas will continue to grow.

Natural gas prices spent the last year at levels higher than the year before as demand rose. Then the hurricanes hit and destroyed some natural gas production, prompting concern about a shortage and causing prices to spike.

In October, Atmos set a record high gas charge of $15.29 per thousand cubic feet.

The company charges the wholesale price of natural gas and doesn't make a profit on the fuel.

However, people across the U.S. didn't use as much natural gas as anticipated. The milder-than-usual winter and the high cost of gas prompted conservation.

That's left gas companies with lots of fuel in storage. According to Department of Energy data, the lower 48 states had 21 percent more natural gas in storage last week than the year before.

The mild weather and storage figures have caused natural gas prices to drop more quickly than oil prices, even though prices for the two fuels typically move in tandem. That means consumers are getting a bigger break on their natural gas bills than their gasoline bills.

Gasoline prices in Dallas have dropped on average 6 percent in the past month to $2.15 on Friday, according to AAA. Compare that to Atmos Energy's 18 percent plunge in gas prices for March from February.

But experts say the decline in natural gas prices may soon come to an end.

Now that natural gas prices are relatively low, James Williams of WTRG Economics said he expects industrial users of natural gas to fire up more plants.

For example, he said, fertilizer plants are cranking up, and some power generators with the ability to switch between fuels are going back to natural gas. Eventually, that increase in demand will prevent natural gas prices from dropping further.

"That kind of thing starts putting a little bit of a floor under prices. I just don't expect them to be dropping like a rock. I think the rock's about to bounce or something," he said.

Weather could also play a role. An active hurricane season could spook the markets, particularly in light of the damage Katrina did to natural gas production last year.

And summer natural gas prices may rise a bit if the weather is abnormally hot and folks turn up the air conditioning. More demand for power would prompt natural gas-fired power generators to boost production and hike demand for the fuel. That doesn't necessarily mean electricity retailers will change their prices along with natural gas, as Atmos has done.

The old monopoly electricity retailers, such as TXU Energy, recently raised the price-to-beat based on the high natural gas prices during the autumn. TXU now offers a separate pricing option that tracks natural gas prices.

Because the monopolies may only seek rate adjustments twice annually, there's little incentive for them to adjust prices now.

E-mail esouder@dallasnews.com

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Source: The Dallas Morning News

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