Winter's shadow getting darker: Gas rates to rise Source: The Providence Journal Publication date: 2000-09-09 Arrival time: 2000-09-12

PROVIDENCE - And the price of natural gas is going up, too. With dark predictions of another expensive winter for people who heat with oil, the state's two suppliers of natural gas are offering no relief.

Both Providence Gas Company and Valley Resources Inc. have asked the state Public Utilities Commission for approval to raise rates 23 percent and 16 percent respectively, beginning Oct. 1.

Thomas Massaro, the commission's chief financial analyst, says the requested "gas-cost charge" reflects increases the companies must pay their gas suppliers.

Such "pass through" requests are usually granted by the commission, Massaro said. But the commission will hold hearings later this month to hear the companies' detailed explanations of how they arrived at their figures.

"It is a situation that every gas utility is in," Massaro said. "Look at the price of [gasoline]. Look at what's happened to the price of oil. There are a lot of reasons why, but mainly people are saying the supply isn't there."

Providence Gas has about 160,000 Rhode Island customers, most of whom are residential customers.

For the average Providence Gas customer, who pays about $1,000 a year for gas, the company's proposed 23-percent rate increase will mean an additional $230, said spokesman James Grasso.

Valley Resources Inc., of Cumberland, has asked for a 16-percent rate increase. But the company filed its request in July, said Massaro, when prices were lower. Valley will likely request a supplemental rate increase later, said Massaro, to make up the difference.

Why the increase?

Says Grasso: "The Department of Energy has said that gas prices have doubled since last year because of a fall-off in production, short supplies and high demand by industry and electrical utilities."

More power plants are coming on line and choosing to use natural gas, Grasso said. "So when you put all those things together, it's a matter of supply and demand."

The rate hike will probably be more shocking to Providence Gas customers, who have enjoyed steady rates for the last three years.

In 1997, Providence Gas entered into a three-year agreement with a supplier, which locked in its cost of gas at $2.20 for each 1,000 cubic feet.

The wholesale cost today is more than double that, says both Massaro and Grasso.

"The market conditions are different now," Grasso said. "It's very difficult to get a gas supplier to lock in at any price right now because of the volatility on the market."

Energy prices are approaching their highest levels in 10 years, a concern that on Thursday prompted a meeting of the New England Council and the New England Governors' Conference.

The news wasn't good. Massachusetts Gov. Paul Cellucci said New Englanders are likely to pay more for oil this winter than last winter, when prices skyrocketed.

A typical Northeast homeowner paid $518 for heating fuel two winters ago and $765 last winter. That same customer should expect to pay more than $900 this year, said one U.S. Department of Energy official.

The Energy Department is projecting that oil prices will average $1.32 a gallon for the winter. In Rhode Island, prices are already at $1.44 a gallon, according to a state Energy Office survey completed earlier this week.

Natural gas prices have also risen to record levels because large industrial customers who have the ability to use oil or natural gas have stopped using oil. That has driven up the demand for gas.

At Thursday's meeting, Thomas Kiley, president of the New England Gas Association, said the region would have enough gas to meet heating needs this winter, but it will be expensive.

http://cnniw.yellowbrix.com/pages/cnniw/Story.nsp?story_id=13699454&ID=cnniw&scategory=Energy%3ANatural+Gas

-- Martin Thompson (mthom1927@aol.com), September 12, 2000

Answers

I don't know whether I agree with Kiley. There is only a little more than half as much nat gas in storage this year as the same time last year. This is a situation that shortages make.

-- Wellesley (wellesley@freeport.net), September 12, 2000.