Natural gas bills may give homeowners a bad chill

Katrina's Wake

September 03, 2005|By Jay Hancock

OIL, GAS AND other forms of liquid energy aren't the only things that will be vacuuming money from your purse in coming weeks.

Because much of the Mid-Atlantic's supply of natural gas is piped from offshore wells on the Gulf of Mexico, damage from Hurricane Katrina makes it likely that Maryland' s 1 million natural gas customers will see hefty price increases for winter heating. Industry officials expect bills to rise even beyond the 20 percent to 30 percent they had already been predicting.

"It's still a little early to have a real clear crystal ball," said Wayne Harbaugh, manager of pricing and regulatory services for Baltimore Gas and Electric, which pipes gas to people's homes and passes along the cost when the market rises. But with reports of hurricane damage to Gulf of Mexico gas wells and piping facilities, he said, "it's certainly likely to be higher than the 20 to 30 percent we were expecting."

A higher-than-expected increase would mean a $150 gas-heating bill last January could top $200 this January - assuming the weather is the same as last year's mild winter. A severe winter would push bills even higher. BGE is also asking regulators to raise its gas delivery charges by about $4 a month for a typical bill.

Nobody's predicting outright shortages of natural gas.

"We should have no trouble in terms of: Will we run out?" said Bethany Gill, spokeswoman for the Maryland Public Service Commission. "We won't."

Even so, the PSC has been concerned enough that on Thursday it ordered representatives from all licensed natural gas companies to a Baltimore meeting Sept. 19 to discuss Katrina damage and likely winter prices for consumers.

More will be known in the next few days as precise damage and production reports emerge from the gulf. Early news of supply disruptions pushed East Coast natural gas prices on the New York Mercantile Exchange as high as $13 per million British thermal units - up from $7 in June - before settling below $12 yesterday.

"It's quite possible that if we see some significant damage in the rigs and damage in the supplies, we could see [wholesale] prices elevated above these levels," said Jason Schenker, an energy economist at Wachovia. And that, he said, "is going to drive the retail price higher."

Most of the natural gas burned in the United States is produced in this country, although imports have been rising.

Once almost purely a residential fuel, natural gas has undergone increased demand in recent years because it can be used to drive power plants that are both cheaper to build and cleaner to operate than those powered by oil, says Charles Miller, research director for the Maryland Energy Administration.

That increased demand had already helped raise the price of natural gas by more than half from 2002 levels. The economics of natural gas are complicated by the fact that it is harder to transport and store than crude oil or gasoline. The only practical way to ship it by sea is to chill it to minus 260 degrees Fahrenheit so it liquefies. But that's expensive, so little natural gas is imported despite abundant world supplies.

Even so, rising U.S. prices and improved liquefied gas technology are making imports increasingly attractive. As evidence, look no further than the arrival Thursday night of the first liquefied natural gas transport to the United States by Gazprom, the Russian petro giant. The ship pulled into the Cove Point liquefied gas terminal in Calvert County that was reopened in 2003 by Dominion, the Virginia-based energy company.

"They [Gazprom] own the largest supply of natural gas in the world, and Cove Point pipeline has access to the largest natural gas market in the world" - the Northeast United States, said Dan Donovan, a Dominion spokesman.

It's a match made in energy heaven, but even with new efficiencies, liquefied natural gas will not solve U.S. energy problems in the short or long terms. Dominion had already been importing liquefied gas from Algeria and especially Trinidad and Tobago into Maryland, where the fuel is introduced into the East Coast pipeline network.

Now Dominion is seeking regulatory clearance to double the capacity at Cove Point, which ought to be granted. But the United States has only four or five liquefied gas ports at the moment, and energy experts say many more will be needed to make a substantial difference for supply or price.

Better buy an extra down comforter for the winter. Before those prices start going up, too.

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