Kevin G. Hall – McClatchy Newspapers
Published: October 11, 2006
WASHINGTON _ Worried that falling fuel prices might lead consumers to draw the wrong conclusion, a trade group for the nation’s natural-gas utilities said Monday that home heating bills should be lower this winter but warned against expecting them to plunge anywhere near as much as gasoline prices have recently.
The American Gas Association, which represents utilities that sell natural gas, painted a much more positive winter outlook Monday than it did a year ago.
“We believe that in most cases consumers will paying less for (natural) gas this winter,” said Paul Wilkinson, the association’s vice president.
How much lower?
The association would say only “somewhat lower,” offering no range for homes heated by natural gas, roughly 52 percent of U.S. households.
“How much will depend to a great extent on the weather,” Wilkinson said, noting that a mild winter would reduce demand for energy and ease prices. A nasty winter would have the opposite effect. “It’s highly likely that it won’t be as mild this year” as last, he added.
After the hurricanes of summer 2005, contracts for future deliveries of natural gas soared to above $15 per thousand cubic feet. Then last winter turned out to be one of the mildest on record, easing energy consumption. Home-heating prices were predicted to rise by almost 50 percent but rose 17 percent, a still-substantial jump.
Since then, Gulf Coast natural-gas production has returned to normal and this year’s hurricane season has been unusually mild. The price for natural-gas contracts fell below $5 per thousand cubic feet in September, only about one-third the record prices of 2005.
Falling natural-gas prices will help bring down home heating costs, but don’t expect your power bill to fall by two-thirds.
Here’s why. Natural-gas utilities guard against wide swings in natural-gas prices by purchasing a portion of their supplies months and even years in advance at a locked-in price. This practice is called hedging. Some utilities purchase as much as 40 percent of their natural-gas supplies in advance locked-in price contracts, according to the American Gas Association.
If the price they pay turns out to be lower than the price on the spot, or daily, market, their consumers benefit. However, if they lock in a price that’s higher than the seasonal daily price, as is the case now, then they and utility customers are stuck.
This is a key reason that heating bills won’t drop sharply like gasoline, which has fallen to a national average of $2.26 per gallon from a high of $3.03 on Aug. 7.
Despite falling market prices, several million Americans could see their fuel bills rise because the federal government is on track to roll back last year’s big increase in energy assistance to the poor and elderly.
The House and Senate Appropriations committees propose slashing the Low Income Home Energy Assistance Program from $3.1 billion in fiscal 2006 to about $2 billion for fiscal 2007, which began Oct. 1.
That would return the program’s funding to about its average annual level; Congress boosted spending on the program last year in the face of soaring home-heat cost projections. Advocates say the program is underfunded, because some 33 million qualify but only 6.3 million households got the benefit last year. The average subsidy was $318 to offset household winter-heating bills that averaged $800 to $1,400.
If Congress cuts the funding, it’ll mean sharp reductions in assistance to families in states such as California and Minnesota, which had seen funding rise by 25 percent and 12 percent, respectively, in the past fiscal year.
“The overall picture is one of concern,” said Mark Wolfe, the executive director of the energy assistance association.
For a state-by-state look at proposed Low Income Home Energy Assistance Program funding online, go to www.neada.org/appropriations/2006-07-20(underline)table.pdf.