Thursday, June 29, 2000

Prices explode for natural gas By JIM HALEY Herald Writer Soaring energy prices will bite a lot of Snohomish County natural gas customers in the pocketbooks, possibly as early as Aug. 1.

Puget Sound Energy, which supplies natural gas to customers as far north as Marysville, on Wednesday filed a request with state regulators for a price hike reflecting the wholesale price increase.

While regional electricity costs also are rapidly rising, Snohomish County PUD customers should be safe at least until the end of this year, officials said.

But Puget Sound Energy's proposed rate hike would raise the average gas bill about $13 a month to $64 under a request filed with the Washington Utilities and Transportation Commission, the company said.

Under most circumstances, the company is allowed to pass on its wholesale purchase costs to the customers.

The gas prices on the open market are nearly double what they were a year ago because of high demand and low supply, said Bill Donahue, senior regulatory analyst with Puget Sound Energy.

"It's a trend that's nationwide. (The price increase) is a pass-through mechanism that's been in place. Rates go up or down depending on the wholesale price," Donahue said. Other gas companies in the area also are expected to ask for a hike.

Gas prices have been relatively low for the last several years, and as a result drilling activity has been low, he said.

"Now that prices are higher, producers are out there drilling wells again," Donahue said. However, it may be a couple years before the supply increases from new wells, he added.

In addition, new pipelines to the Midwest in both the northern United States and Canada put this region in competition for gas with such areas as Chicago.

Another factor is the heat. Many power generation units need natural gas to produce electricity for air conditioners in California and elsewhere, he said.

"I think gas utilities are buying for their customers and electric companies are buying for generation. Because of the heat wave, I think there's more activity," Donahue added.

Wholesale power costs also are on the ceiling right now, but long-term contracts protect utilities like the Snohomish County PUD, said Paul Elias, general manager.

The California heat wave has utilities there buying all the power they can right now at premium prices. In addition, four power generating units in the region temporarily went down at the same time for a variety of reasons.

One was the Columbia Generating Station, the Northwest's only commercial nuclear power plant at the Hanford nuclear reservation. Three coal-fired plants in Washington, Montana and Wyoming also had shutdowns.

"All of a sudden the supply of energy shrunk without those resources," Elias said. "What you have is supply and demand."

PUD customers, however, are not expected to see a price increase as a result. The utility buys and sells only a small amount of power on the open market, and those dealings are pretty much a break-even proposition right now, Elias said.

Even if the shortage continues for a long period, "we are pretty well off, I believe, through the rest of the year" Elias said. "If it becomes a long-term problem, it could have some impacts, but it won't be until the first of next year."

http://www.heraldnet.com/Stories/00/6/29/12737212.htm

-- Martin Thompson (mthom1927@aol.com), June 29, 2000