NATURAL GAS BILLS COULD RISE 50 PERCENT

By Melita Marie Garza Tribune Staff Writer October 3, 2000 Chicago residents are likely to see their natural gas heating bills jump as much as 50 percent this season, officials with Peoples Energy Corp. said Monday.

Prices for natural gas are almost double what they were a year ago, pushed upward as the nation's booming economy makes demands on a tight supply. And many electric utilities are switching from coal-fired generation plants to natural gas generation plants, adding to pressure on the supply.

Natural gas prices were about $1.85 per metric thousand cubic feet at the source last year. But through July of this year, the price was $3.49 per mcf--an 89 percent increase.

Those prices may translate to sticker shock when Chicago-area consumers open their bills this winter.

For October 1999 through March 2000, the average Peoples Energy residential customer who uses natural gas for home heating and cooking paid $735. This season, Peoples Energy is projecting that same customer will pay $1,083, said Luis Diaz-Perez, a Peoples spokesman.

"We are going to continue to communicate with our customers on ways to manage this winter's bill, whether that be through tips on economizing at home or information about payment plans and financial assistance programs," Diaz-Perez said.

In July, Nicor Inc. predicted that its customers, located primarily in the Chicago suburbs, could see their bill rise by as much as $200 over last year for the same six-month period. But Nicor expects to revise that prediction upward this week, said Lee Haines, a spokesman for Nicor.

Haines noted that the October gas cost for Nicor customers is 63 cents per therm, up from 51.5 cents per therm for September. And the October cost per therm is 70 percent higher than last year's cost of 37 cents per therm, Haines said.

Said Marty Cohen, executive vice president of the Citizens Utility Board in Chicago: "Most consumers are unaware of what they are in for this winter. They haven't taken note that gas prices are dramatically higher than they were a year ago."

Cohen suggested that consumers study the gas companies' varied payment options to determine whether spreading payments out evenly over the year would make economic sense for their families.

As expensive as it's likely to be to heat a Chicago-area home this winter, prices are higher in other areas, says Donato Eassey, first vice president for natural gas research at Merrill Lynch in Houston. Nationally, Eassey said, residential prices for natural gas have escalated 88 percent over last year.

"If they are only increasing 48 percent in the Chicago area, they've done a good job of keeping costs down," Eassey said.

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Eassey also said that even if the predicted price increases occur, the cost of natural gas is still much lower than it has been in the past.

Consumers enjoyed a significant decrease in gas prices between mid-1984 and 1999, with prices on average down 2 percent or 3 percent, though the consumer price index stayed steady, Eassey noted.

"We've been spoiled by cheap energy," Eassey said. "It's still the best bargain in town."

But Eassey noted that rising prices appear to be encouraging gas companies to push for exploration, which in the long run could increase supply and keep the lid on prices.

When prices were low, Eassey said, "we just didn't have the drill bit turning to the right often enough. There was not enough incentive to invest in new prospects."

Last year, the number of rigs drilling for natural gas was 597; now the number is up to 806, a 35 percent increase, he said.

-- Martin Thompson (mthom1927@aol.com), October 03, 2000

Answers

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-- Martin Thompson (mthom1927@aol.com), October 03, 2000.

Peoples Gas bills to rise 64%

October 3, 2000

BY TAMMY WILLIAMSON BUSINESS REPORTER

City gas customers could pay a whopping 64 percent more this winter to heat their homes than they did last winter as natural gas prices surge. Last July, Peoples Gas had predicted only a 20 percent increase.

Customers of Peoples Gas, which serves city residents, will on average pay $1,083 to heat a home between October and March, compared with an average $661 last winter, said Peoples spokesman Luis Diaz- Perez.

Energy analysts say price increases in the suburbs could be similar. The increases will begin to show up in customers' October bills. This month, gas bills will rise $5.11, on average, from September as the cost of natural gas continues to climb, Peoples announced Monday.

Customers will pay $27.12 more, on average, than they did last October.

Industrywide, heating costs are expected to jump 50 percent, said analyst Craig Schuttenberg, vice president of Energy Choices Inc. in Highland Park.

These figures are just estimates. Bills will ultimately be affected by how cold it gets. For instance, last winter's average bill was lower than normal because the winter was not as cold as it has been.

"If it's coupled with cold weather, it will be even worse," said Schuttenberg. "If you get whacked with cold weather and high prices, it's going to make a difference."

Natural gas futures traded on the New York Mercantile Exchange have escalated 104 percent in the last year. Prices are rising, experts say, because there is greater demand for the fuel as the electric- utility industry increases its usage to meet demand.

Moreover, as prices remained low in recent years, fuel production slowed. While exploration and drilling is picking up, it won't be soon enough for this winter.

"There was oversupply in the past. What you're paying for [now] is the low prices you've had in the last couple of years," Schuttenberg said.

Gas companies, too, are paying more for natural gas, yet pass those increases along to the consumer dollar-for-dollar without profit markup.

Customers of Nicor, the gas company serving the city's south and western suburbs, will likely see their bills rise, too. Nicor officials could not be reached Monday.

Peoples Gas said it will provide help for customers who have trouble paying higher bills this winter, such as providing tips to make home heating more efficient and payment plans.

Gas customers so far haven't noticed a huge pinch, said Martin Cohen, executive director for the Citizens Utility Board.

"Nobody's feeling any harm yet, but they will when they open their envelope in December," Cohen said.

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-- Martin Thompson (mthom1927@aol.com), October 03, 2000.

City Hall blasts Peoples Gas

October 5, 2000

BY FRAN SPIELMAN CITY HALL REPORTER

Peoples Gas should not be allowed to hike home heating prices a whopping 64 percent simply because the company neglected to store enough natural gas last winter when prices were cheaper, a top mayoral aide said Wednesday.

City attorneys are exploring the possibility of petitioning the Illinois Commerce Commission to either block the increase or cap it on the grounds that "imprudent performance" by gas companies has left consumers in the lurch.

City Environment Commissioner Bill Abolt said there's "nothing beyond the control of the industry" to explain the exorbitant increase in home heating prices, unlike the situation with foreign oil.

"Why are the prices high--other than the fact that people didn't get their act together and pump last year because it wasn't that cold?" Abolt said. "It's a matter that prices weren't high enough for them last year, so they didn't pump enough gas."

Peoples Gas spokesman Luis Diaz-Perez said several factors made it difficult to plan ahead.

Federal rules limit how long natural gas can be stored, and the "geology of gas storage facilities" does not allow for long-term storage of natural gas, Diaz-Perez said.

"We work with multiple suppliers to find customers the best price we can. And the price we pay for gas is the same price customers pay," Diaz-Perez said.

Sometime after the first of the year, Peoples Gas will go through its annual "reconciliation process" with the ICC, giving the city an opening to make its case, ICC spokesman David Farrell said.

"It's a process where the company shows what it spent for natural gas and is subject to a prudency review by the ICC," Farrell said.

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-- Martin Thompson (mthom1927@aol.com), October 05, 2000.