BGE expects 15%-20% rise in gas heating bills

Average customer to pay $700 to $725 this winter

December 11, 2004|By Paul Adams | Paul Adams,SUN STAFF

With natural gas supplies tight for the third straight year, Baltimore Gas and Electric Co. said yesterday that residential customers can expect to pay 15 percent to 20 percent more to heat their homes this winter than they did a year ago.

If this winter ends up being colder than normal, prices could climb even higher, the utility said. In dollar terms, the average customer can anticipate spending $700 to $725 for natural gas from Nov. 1 to March 31, compared with about $600 for the same period a year ago.

Industry experts blame recent volatility in prices on a worsening supply situation as older fields of natural gas yield less and less with each new hole drilled.

"The supply and demand are in a very tight balance right now, so the amount being produced is about even with the amount being used," said Linda Foy, a BGE spokeswoman.

Compared with a year ago, BGE says it has seen a 20 percent increase in customers applying for energy assistance through the Maryland Office of Home Energy Programs, which is financed with federal dollars. But Foy said that may be a result of stepped-up efforts to reach out to low-income customers who qualify for the assistance.

"You see your highest bill in the January-to-February time- frame, so I don't believe at this stage customers are reacting to [price increases]," she said.

The Natural Gas Supply Association, an industry trade group, predicted this fall that demand for natural gas would rise across all sectors as the economy picked up and gas production stagnated. The biggest increase in consumption - about 5.3 percent compared with last year - is expected to come from the manufacturing sector, which is benefiting from an improving economy.

The group said increased drilling activity has failed to compensate for a steeper-than-expected decline in production among "maturing" gas fields. Domestic production is expected to fall to 49.7 billion cubic feet per day from 50 billion cubic feet last winter. Consequently, some industry analysts anticipate price increases of as much as 40 percent compared with last year.

BGE said it expects a more modest 25 percent to 30 percent increase, from about 72 cents per therm (a unit of heat equal to 100,000 British thermal units) last winter to 90 to 94 cents per therm this winter. That's up from 80 cents per therm the utility was expecting to pay in September. At that time, BGE officials were warning customers to anticipate paying $650 to $675 to heat their homes this winter, or about $50 to $75 less than the latest projections.

Since then, prices on the wholesale market have continued to climb along with oil prices. Like most utilities, BGE tries to moderate price increases by entering into long-term buying contracts and storing natural gas in tanks during the summer months, when prices tend to be more favorable. The company stores about 40 percent of the natural gas it expects to use during the winter.

The company encourages customers to have their furnaces serviced to ensure efficiency and to take other steps to reduce consumption.

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