Source: Richmond Times - Dispatch
Publication date: 2003-05-16
Arrival time: 2003-05-17
Those who heat with natural gas - and one-third of Richmonders do - might be wise to spend some time in the summer insulating their homes and investigating their utilities' budget-billing plans.
Supply shortages are expected to push natural-gas prices to what could be much higher levels next winter. At least one prediction has wholesale prices rising so high as to threaten the economic recovery and public safety.
Andrew Weissman, an industry analyst and chairman of the Energy Ventures Group in Washington, said President Bush should ask the Department of Energy to address the risks posed by a natural-gas shortage next winter. He said the federal government should consider establishing a natural-gas reserve similar to the nation's strategic petroleum reserve as a guard against runaway prices.
Weissman warns that gas prices could reach an unprecedented summer level of $8 to $10 per 1,000 cubic feet and sail even higher during the winter months.
Other analysts are not as pessimistic as Weissman, but they also do not expect gas prices to drop back to the $2 to $3 per 1,000 cubic feet this summer as they have in previous years. Summer prices are significant because that is when utilities try to buy lower- priced gas and store it for the winter heating season.
Matthew Ellis, an analyst with 
Wachovia Corp., said he expects natural-gas supplies to remain tight throughout this year, an opinion shared by analysts with A.G. Edwards. Both securities firms predict prolonged supply shortages and wholesale prices of $4 to $6 per 1,000 cubic feet throughout this year.
The country had nearly 38 percent less gas in storage on May 9 than the five-year average for this time of year, the U.S. Energy Information Administration reported yesterday.
Drilling for natural gas dropped off last year but is expected to increase this year along with gas production because of the higher gas prices, the EIA said.
The need for utilities to buy large amounts of gas for storage is helping keep prices high. During this summer's cooling season, the heavy use of gas by electric utilities, which increasingly use it to generate power, could drive prices even higher, the EIA said.
The chairmen of the Federal Energy Regulatory Commission and the Senate Energy and Natural Resources Committee and various U.S. industry groups also have expressed concerns recently about the natural-gas-supply situation. Last week, the National Association of Manufacturers urged a Senate subcommittee to act to boost gas production because escalating prices are hurting the ability of U.S. manufacturers to compete.
Gas utilities acknowledge that higher prices have posed challenges. Utilities typically pass on the cost of gas to their customers on a dollar-for-dollar basis and tack on their regulated rate for delivering the gas to homes and businesses.
"You can pretty much say we will go into the next winter with the highest gas-cost rates in our history," said Dan Donovan, a spokesman for Dominion Resources Inc., which owns natural-gas utilities in Ohio, Pennsylvania and West Virginia. How high prices go will depend on the severity of the winter weather, he said.
Washington Gas, a utility that serves the nation's capital and its Virginia and Maryland suburbs, buys 35 percent of the gas it needs for the heating season in the summer and stores it. Because of the stored gas and the company's commodity-hedging program, only 45 percent of winter sales are affected by higher winter-market prices for gas, said Adrian Chapman, a company vice president.
Chesterfield-based Columbia Gas of Virginia, the state's largest gas utility by service area, does not hedge in the commodity markets but does manage its gas prices through firm storage contracts, said spokesman Bob Innes.
Nick Gold, a spokesman for Virginia Natural Gas, a Norfolk-based utility, said his company expects to have enough gas to serve its customers next winter but does not know what the price is going to be. If the coming winter is as cold as last winter, the price will be affected, he said.
Gas utilities generally offer customers budget-billing plans. On their Internet pages they provide tips for energy conservation, such as making homes more air tight and installing more efficient furnaces.
Natural gas utilities in Virginia can operate energy-choice programs that give consumers a chance to save money on their utility bills by shopping for a supplier other than their utility. Of Washington Gas' 960,000 delivery customers, 219,000 buy gas from an alternative supplier.
Contact Greg Edwards at (804) 649-6390 or gedwards@timesdispatch.com
Publication date: 2003-05-16