Natural gas, propane prices hit home(s)

Soaring prices, unusually cold winter hit consumers with double whammy.

By Errol Castens

Daily Journal

As if Christmas bills weren't enough financial strain, thousands of Northeast Mississippians are receiving a shock this month when they open their natural gas invoices or when they order a refill of propane.

Many consumers have found the cost of space heating, cooking and hot water last month more than twice as expensive as the same period last year. With severe year-end weather (nationally, the coldest November and December on record), usage for most consumers was up drastically.

"Consumption is twice or even three times what they used last year," said Trent Johnson, manager of Booneville's municipal utilities. "We're double-checking a large portion of our meters to make sure (the reading) is correct."

Higher usage helped push residential natural gas prices up, too -- commonly by half to two-thirds -- while retail propane costs also soared -- from roughly $1.10 to $1.75 per gallon over the same period.

While gas utilities and propane suppliers are having no problems getting all the fuel they need for their customers, prices reflect a market without large surpluses. With three consecutive warm winters, natural gas developers and the refiners who make propane had little incentive to find new supplies or to expand refining capacity or reserves. An average of only 481 drilling rigs nationwide were looking for natural gas during any given week during 1999, down from 1998's weekly average of 567 active rigs. By October of 2000, higher gas prices at the wellhead had encouraged more development, with 832 drilling rigs in service across the United States.

Volume, not margin, rising

Gas utilities and propane distributors insist their companies are not drawing extra profit from the climbing retail prices of their products.

"We haven't changed our rates in seven years as far as the percentage we make on the gas," said Mike Horton, district manager of the North East Mississippi Natural Gas District. "It still hasn't changed, but it's subject to going up any time now."

"We're trying to cover expenses for the increases in gas and transportation costs only," said Harold Smith, New Albany's light, gas and water superintendent. A year ago, he said, his department was paying $2.50-2.60 per thousand cubic feet at the wellhead, while this winter's costs have gone as high as $9.80 -- before transportation costs are included. Residential rates have gone from $6.08 to $9.75 in the same time.

Propane dealers find themselves in a similar situation.

"We make a set margin on each gallon, not a percentage of the price," said Shane Parrish, manager of Coast Gas in Tupelo. "I really feel for these (customers). It's putting a lot of them in a bind."

TVA electric rates unaffected

Nationally, electric utilities have increased their use of natural gas to help meet federal emissions standards and to supplement peak-load generating capacity. The Tennessee Valley Authority, which supplies power for most electric utilities in Northeast Mississippi and parts of several nearby states, will not see a rate increase in response to short-term natural gas hikes, however.

"The short answer is no," said TVA spokesman Gil Francis. "We set rates back in the summer for Fiscal Year 2001." TVA produces only a tiny percentage of its power from gas, using mostly coal, nuclear and hydro generation instead.

Relief efforts

Despite the fact that some utilities are losing money at current prices, gas suppliers are trying to help customers deal with the financial blow of their latest energy bills. The Mississippi Public Service Commission on Wednesday asked gas companies under its jurisdiction not to disconnect "any customer who is making a good faith effort to pay their utility bills."

One bright spot in the gas story is that warmer forecasts for the Upper Plains and much of the Midwest sent gas futures down by nearly 42 cents per million BTUs (roughly equivalent to one thousand cubic feet) to $8.71. Prices for next-day delivery dropped by 91 to 92 cents from Wednesday's $9.85-9.95 to $8.94-9.03.

http://www.djournal.com/djournal/site/articles/news/198339.htm

-- Martin Thompson (mthom1927@aol.com), January 12, 2001