NAT GAS SHORTAGE COULD LEAD TO CRISIS by sherwood 21 June 2000 19:41 UTC

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FWD from Paul Wozniak KEYSPAN EXEC: NAT GAS SHORTAGE COULD LEAD TO CRISIS If New York residents thought this past winter was bad, an official with Keyspan Corp. predicts a natural gas shortage will make next year even worse, reports Dow Jones Newswires.

Keyspan senior vice-president David Manning told the Canadian Association of Petroleum Producers Oil & Gas Investment Symposium that the U.S. is "not going to have the gas we need when we need it." He predicts it could approach crisis levels this October. He said the U.S. has 25 percent less natural gas and oil in storage than a year ago (Dow Jones Newswires, June 20, 2000).

http://csf.colorado.edu/longwaves/jun00/msg00358.html

-- Martin Thompson (mthom1927@aol.com), June 21, 2000

Answers

Natural-gas prices heating up

By Cecily Fraser, CBS.MarketWatch.com Last Update: 7:21 PM ET Jun 21, 2000 NewsWatch Latest headlines

SAN FRANCISCO (CBS.MW) -- The price of natural gas -- the stuff thats used to cool your house in the summer and heat it in the winter -- has been rising sharply along with crude oil and gasoline in recent weeks.

The increase in natural-gas prices, which hit a four-year high in late May, has largely escaped public attention, overshadowed by events in the oil patch. But this widely used fuel is just as volatile, analysts said.

At issue are concerns that decreasing supplies of natural-gas stocks could increase the year-to-year deficit, making it difficult to replenish storage facilities by next winter.

All our incremental electo-city generating capacity that is being built in this country is all natural gas fired.

Tim Evans, IFR Pegasus The underlying problem is not that last winter was cold, and its not that this summer is going to be extraordinarily hot, but rather that all our incremental electo-city generating capacity that is being built in this country is all natural-gas-fired, said Tim Evans, senior energy analyst at IFR Pegasus.

This creates more competition among electric utilities in need of the available gas supply, he said. So we have less of an opportunity to build inventory through the summer, and it virtually guarantees inventories at the start of next winter are going to be lower than last year. Perhaps on the order of 20 to 25 percent lower.

The price paid for natural gas by consumers depends on the price of the commodity itself and the cost of transporting gas from production areas to customers.

Statistics from the America Gas Association show that stocks have dropped as much as 25 percent from year-ago levels. July natural-gas futures are trading at $4.155 per million British thermal units on the New York Mercantile Exchange. A year ago, prices hovered around $2.23 per BTU.

The latest inventory report from the AGA was slated for release late Wednesday. Analysts were expecting to see a rise of 70 billion cubic feet. Still, thats below the 85-bcf increase reported last year.

Evans said that, while the past three winter seasons have been warmer than usual, If we get a hot summer followed by a cold winter, then the upside potential on this market is particularly wide open.

The National Weather Service is forecasting above-normal temperatures this summer in the Midwest, which is the biggest U.S. consumer of natural gas.

http://cbs.marketwatch.com/archive/20000621/news/current/consumer.htx? source=blq/isynd&dist=srch

-- Martin Thompson (mthom1927@aol.com), June 21, 2000.

Last Updated: Friday 23 June 2000

Natural gas prices explode by 33%

Chad Skelton Vancouver Sun

BC Gas / The average natural gas bill over the last three years for a resident in the lower mainland: 1998 - $681, After Jan. 1,'99 - $748, After Sept. 1,'99 - $821, After Jan. 1,'00 - $878, After July 1,'00 - $1,164

Lower Mainland residents who heat their homes with natural gas are in for a shock come Canada Day: A 33-per-cent rate increase will force the average homeowner to pay almost $300 more a year.

It is only the latest in a series of increases that will see homeowners paying 71-per-cent more for natural gas next month than they were just three years ago.

The jump -- the largest in B.C.'s history -- was approved Thursday by the B.C. Utilities Commission after a request from BC Gas.

The average homeowner will now pay $1,164 a year for gas -- $286 more than they're paying now and $483 more than they were paying in late 1998.

But the utility stressed that the new rates are due solely to the skyrocketing price of natural gas on the open market -- gas the utility buys for customers without a mark-up.

"BC Gas is not profiting from this rate increase," said Verne Prior, a spokesman with the utility. "Not by a penny."

And it is still cheaper to heat your home with natural gas than electricity.

While it costs about $1,164 to heat a typical home with gas in Vancouver, it would cost $1,563 with electricity, Prior said.

"Natural gas is still your cheapest fuel in the Lower Mainland," said Bill Grant, executive director of the utilities commission. "But it used to be a bargain."

The commission said the deregulation of natural gas prices in 1985 and the North American Free Trade Agreement have resulted in B.C. natural gas prices being dictated by the North American market.

For the past few years, B.C. has been shielded from some of those market increases. That's because there were not enough pipelines to transport gas produced in Western Canada to meet demand in the U.S. That created a surplus in B.C., and lower prices. But the construction of new pipelines has eliminated that surplus, forcing B.C. residents to face the full impact of increased prices.

For the past six months, BC Gas has been paying more for gas than what it sells it for -- which has cost the utility about $50 million to $70 million.

It had asked the utilities commission for a 37-per-cent rate increase, in part to compensate it for those earlier losses, but the commission reduced that to 33 per cent to soften the blow to consumers. But that means another rate hike could be coming as early as next January to reduce BC Gas' deficit.

Grant said this latest rate hike is unprecedented.

"I can't recall an increase in rates of this magnitude," he said. Until about two years ago, he said, the commission considered any rate hike approaching 10 per cent a concern -- because it might cause "rate shock" among consumers.

"This is far exceeding our view of what rate shock is," Grant said.

And before 1998, large hikes in natural gas prices were rare. From 1984 to 1998 -- a span of 14 years -- the price of natural gas rose only 16 per cent.

Richard Gathercole of the B.C. Public Interest Advocacy Centre, said next month's rate hike will be particularly hard on elderly pensioners who have fixed incomes and often live in large, poorly insulated homes that cost a lot of money to heat.

The B.C. Federation of Labour called on the provincial and federal government Thursday to launch a public inquiry into deregulation of the energy industry and rate hikes, in particular their impact on the poor.

Len Coad, vice-president of natural gas and electricity with the Canadian Energy Research Institute in Calgary, said the primary cause of increased natural gas prices is the jump in demand south of the border.

Americans are increasingly using natural gas to generate electricity because it is more efficient than coal and does not have the high start-up costs of nuclear plants. And the economic boom in the U.S. is spurring demand for electricity.

More electricity is needed to power air conditioners to keep offices full of new workers cool, to power the factories that make all the new products we're buying, and to power the new appliances and electronic gadgets after we buy them.

And while drilling for new gas has increased, it hasn't kept up with demand, Coad said.

Despite those factors, Coad said natural gas prices are higher than they should be and predicts the price of gas will drop somewhat by year's end. But others are more skeptical.

"This is not the end of increases in the price of natural gas," predicted Gathercole.

http://www.vancouversun.com/newsite/news/000623/4332601.html

-- Martin Thompson (mthom1927@aol.com), June 23, 2000.