Winter natural gas held plentiful

Utilities, marketers note drilling, demand, inventory as factors

September 26, 2001|By Dan Thanh Dang | Dan Thanh Dang,SUN STAFF

Maryland utilities and energy marketers said yesterday that natural gas supplies are sufficient to meet consumer demands this season, and prices likely will be markedly below last winter's, when home heating costs doubled and tripled.

Increased drilling, a rise in inventories and less demand from industrial users have helped lower the cost of natural gas by 80 percent, energy companies told a retail gas market conference held by the Maryland Public Service Commission.

Still, consumers will see their costs drop a fraction of that, mainly because the natural gas in storage includes supplies bought last spring at much higher prices.

In addition, conference participants began discussing procedures to help improve the retail gas market in the state, as well as how to ensure uninterrupted service even when suppliers leave the market with little warning.

"Storage is high, capacity is available," said Timothy W. Merrill Jr., a consultant to Amerada Hess Corp., a licensed gas supplier active in Maryland. "It would seem we're a long way from $10 prices [per million British thermal units] of last winter, but a lot of things can happen. Forecasting the availability of natural gas, as we know, confounds experts."

Natural gas futures fell below $2 per million BTUs this week on the New York Mercantile Exchange.

Said R. Earl Lewis, a representative from Baltimore Gas and Electric Co.: "Supply is up. Demand is down. This winter, the prices will likely be down."

But even though gas prices are expected to decrease, customer bills will fall only about 20 percent to 25 percent compared with last winter's prices - barring unforeseen problems.

That's significantly higher than the historic five-year average, utility companies said.

Consumers were hit hard last winter when home heating costs soared across the nation.

Thousands of utility customers in the state encountered difficulty paying winter bills and lost service or were threatened with termination.

Also, as a result of high energy prices, many alternative natural gas suppliers abandoned the residential market and left thousands of customers to contend with higher prices and few choices while shopping for new contracts. Many customers, who thought they had switched to an alternative supplier, were returned to their local utility for natural gas service with no notice.

Yesterday, as participants at the conference sought to reassure state regulators, suppliers also spent a great deal of the time outlining obstacles they said hindered their ability to compete in the state.

Market opened in 1999

Maryland's natural gas market was opened to suppliers in 1999, although utilities such as BGE, Washington Gas Light Co. and Columbia Gas of Maryland Inc. continue to transport gas through pipelines and deliver to customers.

Suppliers argued yesterday that business procedures and marketing rules created by the local utilities hindered competition by taking too much time and adding costs on suppliers who want to enter the market. Some utilities require that suppliers present bond guarantees in case they default on service. Some also demand that suppliers find an alternative provider as a backup service in case they abandon the market.

They also complained that a delay in switching customers from one supplier to another confused consumers. Others said that a requirement by utilities that alternative suppliers must maintain excess reserve supplies was too costly.

"Everything that drives up costs for suppliers makes it that much harder for us to compete against the price the utility can offer," said Thomas W. Kinnane, an attorney representing Total Gas & Electric Co.

Suggestions by suppliers

Some suppliers suggested that local utilities should be blocked from also being suppliers.

"NewPower Co. believes that markets develop when the incumbent utility is no longer in the sales and marketing of the commodity," said Martha A. Duggan, who represents the New York--based parent company of electricity and gas subsidiary, The New Power Co.

Representatives of the utilities said they planted to continue to remain in the natural gas supply market.

"We believe the consumers should have total choice, and that should include choosing the utility should the utility decide to stay in the supply business," said Doug DeWitt, director of gas regulatory planning for BGE.

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