Factors Align for Lower Prices

Ohioans using natural gas to heat homes and businesses are expected to spend less over the course of the winter than in 2005. But Mother Nature may have something to say about that, experts note.

Raymond L. Smith
Tribune Chronicle

December 9, 2006

Ohioans using natural gas to heat homes and businesses are expected to spend less over the course of the winter than in 2005.

But Mother Nature may have something to say about that, experts note..

Dominion East Ohio Gas Spokesman Jeff Zidonis emphasized that all of the conditions are right for consumers to pay less during this winter season.

“The underground tanks are full of natural gas, and over the last two months, our customer bills have been less than they were this time last year,” he said. “If we have a mild winter, there should be savings. If it is colder than normal, then it’ll depend on the weather.”

The Energy Information Administration expects the spot price for natural gas to be below $9 per thousand cubic feet of gas, or mcf, for the upcoming winter season, peaking at $8.70 per mcf in January.

There has been no relative growth in total natural gas consumption is projected in 2006 compared with 2005, but a 1.3-percent increase is expected in 2007.

The average winter bill was $1,024.75 over the winter heating season during 2005, Zidonis said. In the years prior, the average residential customers paid $945.22 in the 2003-04 season, $711.14 in 2002-03 and $651.87 in 2001-02.

Under Dominion’s new Standard Service Offer, or SSO, customers who buy gas from the utility starting Wednesday will pay $9.758 per thousand cubic feet (mcf). That’s more than November’s $8.593 rate, but 13.6 percent lower than the $13.024 they paid as year ago. As a result, the average residential customer’s bill for December would be $49.18 less than $264.45 last year.

The gas utility company is gradually working to move its 400,000 customers who still purchase natural gas directly from the utility to one of the nine gas marketers available in its region. Only about 30 percent of Dominion East Ohio’s 1.2 million customers buy their natural gas directly from the company. The remaining customers purchase their gas from marketer.

Dominion’s eventual goal is to provide the infrastructure to transport gas being sold by other suppliers to customers through existing and new lines, as well as provide other services.

Energy Choice marketers, including Commerce Energy, Direct Energy, Interstate Gas Supply Inc, Vectren, Dominion East Ohio Energy, Peoples Energy Services, MxEnergy, and WPS Energy Services.

These marketers are able to develop long term plans in which they sell their product at fixed rates. Depending on the plan and the forces of nature, fixed rates plan could cost consumers less than they would pay on a monthly basis.

Darrell Bragg, a vice president of WPS Energy, said if the country has a relatively mild winter, prices should remain low because the underground storage facilities containing natural gas are filled to near capacity.

However, heating costs will be highest ever other than that natural disaster year, which happened in 2005 with Hurricane Katrina.

WPS Energy is one of nine gas suppliers that provide natural gas for consumers in the Dominion Natural Gas service area.

Jeffrey Mayer, president of MxEnergy, said he does not know whether natural gas prices will increase over this winter season, but he emphasized that Ohioans can protect themselves from the up and down nature of the natural gas market by locking in their prices.

‘‘Volatility of gas is over 80 percent, which, in statistical terms, means that there is a one-third chance that the price of gas next year will be either 80 percent higher or 80 percent lower than it is today,’’ Mayer said. ‘‘Fixed price natural gas supply protects the consumer from price shocks.’’

Mayer says Ohio has been a leader in opening up its energy markets to competition. More than 60 percent of Ohio homeowners buy their supplies from competitive marketers. In New York, which has a similar program, only 15 percent of their homeowners buy their natural gas from gas marketers.

Zidonis says Dominion customers do not have to hurry in choosing a new gas marketer right away, because it is expected to take two years for it to complete the first phase of the project. It is only when that is completed that the state’s regulatory officials will look at granting the company permission to stop selling natural gas.

Ohio is the only state in which Dominion is looking at a program in which it will not sell nature gas. Other states, including West Virginia, Pennsylvania, New York, Maryland and Virginia, do not have choice programs that are as extensive as in Ohio.

Ohio Consumers’ Union, which is a watchdog group looking at utility regulations and pricing, believes Dominion’s program has shown some promise.

Erin Biehl, a spokeswoman for the consumer group, said Dominion are projected to pay market cost plus $1.44 per mcf under the new standard service offer, compared to market cost plus $2.36 under the old calculation method called Gas Cost Recovery.

Dominion is the only major gas supplier/transporter in Ohio to change from GCR to SSO pricing. The other major natural gas suppliers in Ohio are Columbia, Vectron and Duke. They are remaining under their current systems.

The Ohio Consumers’ Counsel says that Dominion’s version of the Choice program is one of the most successful in Ohio, bec ause it and and Columbia Gas Company have enough alternative natural gas suppliers in threas to offer residents real financial choices.