Marylanders' natural gas bills have gone up 50 percent to 60 percent this winter. They're not going back to where they were any time soon. And there's not much the state can do about it.
That's the grim message the state's chief utility deregulator delivered yesterday as she tried to explain to lawmakers why their constituents and businesses that depend on natural gas have been socked with large and unexpected increases since October.
Catherine I. Riley, chairman of the Public Service Commission, told the House Environmental Matters Committee that natural gas price increases have far exceeded the estimate of 25 percent to 27 percent that suppliers gave the commission in October.
Riley offered a slight glimmer of hope about future prices.
"Next year, the price should be down, but I doubt that it will be down to where it was last year," she said. It might be a long time before consumers see prices that low again, Riley said.
While the PSC regulates the price of transmission, it has no control over the price of the gas itself. Customers essentially pay whatever the market dictates.
Riley reassured legislators that the state is not facing a supply crunch and is in no danger of rolling blackouts such as those affecting California. Unlike that state, Maryland does not rely heavily on natural gas for electricity generation.
The PSC cited a combination of factors for the recent increases, including a colder-than-normal winter, increased national demand for natural gas and supply constraints resulting from years when low gas prices provided little incentive to drill.
The price jump was especially severe in December, when temperatures nationally were 26 percent lower than normal, the commission said.
Constellation Energy Group Inc., parent of Baltimore Gas and Electric Co., said its cost of buying gas rose 182 percent from December 1999 to December 2000. It said a typical residential customer's bill went from $82.80 to $158.94 in December - a 92 percent increase. The price increase was less in January, 55 percent, BGE said.
People's Counsel Michael Travieso said residential customers are facing a double whammy because cold temperatures have forced them to use more units of heat at the same time the per-unit price has increased. Travieso said his office is getting 10 to 15 calls a day from low-income Marylanders who cannot pay their bills and have been threatened with cutoffs. He urged utilities to continue to show flexibility in such cases.
Robert S. Fleischman, general counsel for Constellation, said the utility has been working with low-income customers to see that they are not harmed by the price increases.
The utility executive said the price increase had nothing to do with either the California energy crisis or the legislation passed in 1999 restructuring Maryland utilities. "The prices are high because of temporary supply-demand imbalances," he said.
Some lawmakers seemed to be looking for someone - anyone - to blame for the increases. Del. Donald B. Elliott, a Frederick Country Republican, pressed Riley on whether the price increases should have been foreseen.
Riley said nobody could have predicted that spot market prices for natural gas would triple in a few months. Gas contracts that were selling for a little over $3 per British thermal unit in the spring have gone as high as $10 in recent months. "I would never have thought going into this winter that there would be $10 gas across the United States. I would never have believed there would be $50 gas in California," Riley said.
From the mid-1980s until recently, consumers benefited from the national move toward energy deregulation that began in 1978, said Kevin Madden, a deputy director at the Federal Energy Regulatory Commission. He said futures prices were already beginning to moderate, from $10 to $7, amid indications of increased drilling. "These are the signs of a well-functioning market," Madden said.
