Dateline: October 6, 2005

Natural gas prices expected to soar

By Roger  Estlack, Clarendon Enterprise

GreenLight Gas customers should sign up for the company’s 12-month average billing and do it now to ease the pain that’s going to come with this winter’s heating bills.

“I’m going on it, and everybody else should,” GreenLight General Manager Brent Wheeler told the Enterprise this week.

The dual blows of hurricanes Katrina and Rita have caused the natural gas industry to anticipate shortages this winter that could drive prices higher, and the Texas Railroad Commission reports that prices could increase 39 to 95 percent and be as high as $15 per thousand cubic feet (Mcf).

Wheeler said his company paid $8 per Mcf last year, and this week his price is at $14 per Mcf.

“Last winter, I thought it was ridiculously high,” he said. “Now we wish we had bought all we could at $8, but we thought it would come down from that.”

A consumer’s gas bill is made up of three components, and only two are regulated (the pipeline transportation and local distribution cost).  The actual commodity cost is unregulated and varies according to market conditions.

Although the industry’s storage capacity is currently a little above the five-year average for this time of year, Wheeler said market anticipation and volatility are driving prices higher.

“Everybody is scared,” he said. “Forecasters are talking about hurricanes in October. We’ve already taken two big hits (to production), and any bad news now will drive prices even higher. Supply is shut down (in some areas), and it needs to get back up and going quickly.”

Unlike crude oil and home heating oil, there are no national reserves for natural gas. But Wheeler notes that natural gas prices do track the price of oil; and some industry analysts think that if President Bush taps national oil reserves to lower those prices, gas prices might follow.

In the meantime, Wheeler says gas customers should prepare for the worst and expect those record high bills to show up in December.

Using his own personal gas bill from a peak month last year, Wheeler said gas usage that cost $143 last year will cost $206 at the current price this year. That’s a 44 percent increase, and it could get worse.

“I’ve got a fireplace, and I’ve already started chopping more wood,” Wheeler said. “My wife and I have purchased electric blankets, and we’re going to try to lower the thermostat ten degrees before going to bed each night.”

The railroad commission is also encouraging consumers to practice conservation measures that include insulating, sealing and weather-stripping windows and doors; adding insulation to attics; making sure duct work is properly insulated and sealed; and keeping blinds and draperies open on sunny days to let in the sun’s warmth.

Commissioner Victor Carrillo also said, “It is important to note that natural gas utilities are not allowed to profit off the commodity of natural gas. Instead, utilities pass the commodity cost onto customers when the price rises or falls. Utilities are only allowed to profit off transporting gas to customers. And ultimately, the RRC does not have the authority to regulate natural gas prices.”

High energy costs hit small communities hard, Wheeler said. Higher fuel prices show up not only in utility bills and at service stations, but also at supermarkets and local merchants.

Wheeler urges all his customers to call his office at 259-1444 today to sign up for 12-month average billing, and he says people should call their electric provider and do the same.