NiMo: Heating Costs Will Increase
35% This Winter

Post Standard
September 15, 2005
By Tim Knauss

Niagara Mohawk customers should plan to pay 35 percent more to heat their homes this winter than they paid last winter, when heating bills hit record high levels.

A typical household will pay an estimated $1,377 for natural gas from November through April, utility officials said Wednesday. That's roughly $360 more than last year and twice as much as customers paid as recently as four years ago.

"It is . . . a sobering message," said Joseph T. Ash Jr., Niagara Mohawk's vice president of energy supply, pricing and regulatory proceedings.

Ash urged customers to make sure their houses are well insulated to try to offset the impact. Actual gas prices may vary from Niagara Mohawk's forecast, depending on the weather and other factors, Ash said.

And the pain won't be limited to residential customers. Businesses ranging from mom-and-pop stores to major industries will confront the effects of soaring natural gas costs.

Randy Wolken, president of the Manufacturers Association of Central New York, said some energy-intensive manufacturing operations could face bill increases of tens of thousands of dollars. They face the added threat of higher electricity prices, because natural gas is a key factor in wholesale power prices. "It's going to be a significant hit on manufacturers," Wolken said. "It's not a pretty situation right now."

The bad news about natural gas is consistent with trends for other heating fuels.

Home heating oil in Central New York cost an average of $2.55 a gallon last week, 59 percent more than a year ago, according to the New York State Energy Research and Development Authority. The average propane price of $1.91 a gallon was 19 percent ahead of last year's price, NYSERDA said.

Natural gas is the most common heating fuel in Central New York, according to the U.S. Census Bureau. Gas heats 76 percent of households in Onondaga County; 50 percent in Cayuga County; 43 percent in Oswego County; and 40 percent in Madison County.

The expectation of higher bills reflects the rising cost of natural gas that Niagara Mohawk procures for customers and sells without markup, Ash said.

Niagara Mohawk's rates for delivering gas, a source of its profits, have remained virtually unchanged for a decade.

Officials at NewYork State Electric & Gas, which serves customers in Cayuga County and southwestern Onondaga County, said they expect higher gas prices this year, but did not predict how high.

Natural gas prices have been volatile on the national wholesale market because the supply is barely adequate to meet the growing demand, said Chris McGill, managing director of policy analysis at the American Gas Association.

This summer, gas prices rose steadily because unusually hot weather created high demand for gas-fired electricity, McGill said. Between late May and late August, prices on the New York Mercantile Exchange increased more than 60 percent.

Then Hurricane Katrina sent prices even higher by knocking out interstate pipelines that bring gas north from the Gulf Coast, McGill said.

About 7 percent of domestic gas production is still unavailable because of problems caused by the hurricane, McGill said. "In a tight market, that matters," he said.

Although gas supplies are tight nationally, Niagara Mohawk will have adequate supplies to meet customer needs, Ash said.

Actual prices will depend on the weather and other factors. Colder-than-normal temperatures will spur customers to use more gas, and may push prices even higher than projected; unusually warm temperatures would have the opposite effect.