Natural Gas Prices Are Up to Stay, Energy Forum Told: Madison Conference Stresses Need to Reduce Use of It

By Thomas Content, Milwaukee Journal Sentinel

Apr. 13–Madison — The price of natural gas is expected to remain both volatile and high for years, making it all the more urgent for businesses and homeowners to take steps to reduce their usage, energy experts said Wednesday.

“High energy prices are not temporary, they are the new reality,” said Dan York, senior research associate with the American Council for an Energy-Efficient Economy, during a forum sponsored the University of Wisconsin-Madison’s Public Utility Institute. “Midwest states must plan accordingly.”

Governors in Wisconsin and Iowa are leading an eight-state Midwest regional effort designed to reduce usage of natural gas 1% a year over the next five years.

The eight-state initiative could result in a drop in the price of natural gas of up to 13%, according to a study last year the American Council, said Alecia Ward of the Midwest Energy Efficiency Alliance.

The price of natural gas has skyrocketed in recent years amid its growing use to generate electricity, increased uncertainty about long-term supply of gas and speculation hedge funds and investment banks in the trading of natural gas futures, and supply disruptions that followed hurricanes last summer.

Wisconsin homeowners were bracing for a 40% to 50% spike in the cost to heat their homes this winter, but a warm winter helped keep the increases lower — at 19% to 20%.

But that mild winter also kept some customers from taking more steps to conserve energy. We Energies was expecting greater response to its program that offered hardware store discounts to customers who bought insulation, programmable thermostats or other energy efficient products, said Roman Draba, vice president of regulatory affairs at We Energies.

Interest in saving on natural gas bills remains high. We Energies has seen early success in other natural gas efficiency projects, including projects designed to reduce gas usage in apartment buildings and at small businesses, Draba said.

Eleven state companies, including some large energy-intensive businesses, have been selected for free energy assessments under a federal Department of Energy energy-saving initiative. Participants include Mercury Marine, Georgia Pacific, Stora Enso, ThyssenKrupp and Quad/Graphics.

“Wisconsin received 11 of these free energy assessments — far more than the national average of four per state,” Gov. Jim Doyle said in a statement.

The move toward energy efficiency comes as U.S. production of natural gas has stagnated, and experts say solutions that would yield more supplies of gas — greater imports of a liquefied form of natural gas or construction of a new natural gas pipeline from Alaska — are up to a decade away.

Spending money to invest in equipment that reduces the price of natural gas can have a double impact for customers — saving them money on their own gas bills and then reducing the price of gas traded on futures markets, experts said.

Also needed, said Cheryl Harrington of the Maine-based Regulatory Assistance Project, is regulation of utilities that encourages them to promote energy efficiency.

State regulators need to recognize that utilities seek to maximize profit and take advantage of that “building incentives that help create a corporate culture that embraces efficiency as resources,” she said.

Charlie Higley, executive director of the Wisconsin Citizens’ Utility Board, said more regulation of the natural gas futures markets is needed, particularly with the growing involvement of hedge funds and investment banks in the trading of natural gas price futures.

Valerie Wood of Verona-based Energy Solutions, a company that tries to help customers manage their energy costs, said energy efficiency could help reduce the wild swings in the price of the commodity, which does nothing but attract interest in traders seeking to profit from those swings.

“If a lot of states get together to move forward (with cutting demand), that message will flow through and serve to move the speculators out of this market and into another one with more volatility,” she said.

—–

Copyright (c) 2006, Milwaukee Journal Sentinel

Distributed by Knight Ridder/Tribune Business News.

For information on republishing this content, contact us at (800) 661-2511 (U.S.), (213) 237-4914 (worldwide), fax (213) 237-6515, or e-mail reprints@krtinfo.com.

NYSE:BC, XETRA:TKA, Unknown:QGI,