Natural gas prices will likely rise this winter

Published 12:00 am Tuesday, September 26, 2000

Staff Report

Sept. 25, 2000 10 PM

Gas customers in Pike County will likely see an increase on their bills this winter.

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Jim Smith, general manager of the Southeast Alabama Gas District, said he wants to give customers "ample warning that the cost of natural gas has been rising since late last spring and users everywhere are likely to face higher home heating bills this winter."

Smith explained the market prices for natural gas rose during the summer, along with prices for gasoline, oil, electricity and other energy sources.

"Many local gas systems are forecasting price increases of 20 to 40 percent," Smith said. "At the Southeast Alabama Gas District, we expect prices to rise, but we hope to keep our increase on the lower end of that estimate. If we have cold weather, gas bills could rise even more."

According to Smith, there are three main reasons for an increase in natural gas bills: an increase in demand for all forms of energy, natural gas is both inexpensive and environmentally friendly and used more to generate electrical power and summer usage decreased storage stocks and market prices rose.

"Complicating the supply and demand picture is the fact that natural gas prices have been low and temperatures have been milder than normal for the last three winters," Smith said. "There has been little incentive for the gas producers to build up larger gas inventories."

Commenting on this summer’s high natural gas prices, Federal Reserve Chairman Alan Greenspan recently said the increase in natural gas prices was not unexpected.

He told a congressional committee that since natural gas prices are now higher, drilling should increase and prices should fall and, then, ultimately, moderate. He added, though, it takes time to get wells in place and bring up inventories of natural gas high enough to bring down the current gas prices.

Smith said the District expects gas prices to ease in time, but that time will not be until after winter.

In the meantime, consumers can prepare for higher natural gas prices.

There are several things consumers can do to reduce the impact, such as weatherizing their home; replace old furnaces and appliances with new natural gas-fired, energy-efficient ones and consider putting aside savings or making larger monthly payments now for the heating bills once winter is here.

"We are not happy to bring this news," Smith said, adding he wants consumers to have time to take the necessary steps to conserve energy.

Although "market prices are beyond our control," Smith said the part of the gas bill that covers delivery to the home has not increased.

"We intend to keep it that way," Smith said.

During the summer, the Southeast Alabama Gas District raised its rates by 16 cents per hundred cubic feet because of the increased prices the utility company was paying.

The District purchases gas on a "hedging" system, which means it can decrease the price it pays if the price of gas goes down. It buys gas supplies over a period of time and , if it wasn’t for hedging, it would be locked into the price.