Gas heat bills expected to stay the same

Prediction is based on milder winter

$570 vs. $592 last season

Fuel costs more, but people will use less

December 04, 2003|By Dan Thanh Dang | Dan Thanh Dang,SUN STAFF

First, the bad news: Expect to pay higher prices for natural gas this winter.

Now, the good news: The gas company is expecting a milder winter than last year's.

Combine those two pieces of information and it could spell relief for weary consumers in the Baltimore region who watched their heating bills double and triple last winter when extremely cold temperatures drove up demand and low storage levels sent prices soaring.

But that doesn't mean heating bills will drop drastically. It just means that if nature cooperates, you'll be fortunate enough to pay the same amount to keep warm this winter as you did last year.

Of course, if it gets colder than average, you could lose again.

"The glass is half-full or it's half-empty, depending on your perspective," said Mark Stultz, a spokesman for the Natural Gas Supply Association, an industry trade group. "That's good news, given what people were afraid of at the end of last year. There was big concern over the summer months about what would happen to the natural gas market this year."

Maryland utilities are taking the "half-full" approach.

In the Baltimore region, the average bill for residential customers for last winter's heating season - which started Nov. 1, 2002, and ended March 1 this year - was about $592, according to Baltimore Gas and Electric Co., which serves more than 600,000 customers in the area.

For this winter, BGE predicts that bills will be about $570 for the season.

"We're telling customers that they'll spend about what they did last year," said Wayne Harbaugh, BGE's manager for pricing and regulatory services. "I'm not in the weather forecasting business, but last winter was the fourth-coldest winter since BGE has been keeping records. It was 13 percent colder than normal.

"If you believe in fuzzy brown caterpillars or weather forecasters, we're expecting the winter to be normal. And if that happens, our customer consumption will go down," Harbaugh said. "We hope that's the case."

"We're still in a situation where we have a tight wholesale natural gas market," Stultz said. "So we're very vulnerable to Mother Nature. It's such a cliche, but our fate is in her hands."

Check the National Oceanic and Atmospheric Administration's Climate Prediction Center, and it will get as specific as, "temperatures and precipitation will vary this season, especially in the East."

For the first three months of 2004, the region "will have equal chance of above-, below- or near-normal temperatures and precipitation," NOAA said in its November winter outlook.

Washington Gas residential customers, who number about 400,000 in the state, can expect to pay about 15 percent less during the winter heating season compared with the same period last year, the company said in October.

Columbia Gas, which serves about 34,000 in Western Maryland, won't make any predictions, but spokesman Robert Boulware said, "Demand through November was down due to weather. If we continue on a mild weather track, it will be reflected in prices. But what we don't know is what the weather is going to be."

The Energy Information Administration, an independent statistical agency within the Department of Energy, projects that wholesale natural gas prices will average $4.18 per thousand cubic feet during the last two months of 2003 and increase to $4.36 in January 2004. This winter could see prices in the $4 to $6 range.

However, the agency also predicted that prices in the residential sector will likely be about 8 percent higher than last winter. Some industry experts predict the cost could go as high as 15 percent more than last year.

Utilities such as BGE purchase and store some of their winter gas supply over the summer, when prices are normally lower.

BGE stored about 40 percent of its winter natural gas supply during the summer, and at least 10 percent of its winter gas is bought at fixed prices to help alleviate price volatility.

But a number of factors are keeping natural gas prices high.

U.S. production levels, which account for 85 percent of the natural gas consumed in the country, were about 3 percent lower in 2002 than they were the previous year. Increased drilling this year will bring on new supplies only after a time lag, said the Energy Information Administration.

The supply and demand for natural gas is about even, experts say, keeping the wholesale market tight.

Net imports also fell by about 3 percent last year and continued to fall this year when demand was high.

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