Natural gas prices skyrocket

09/30/2005

Joy Powell,
Star Tribune
September 30, 2005

The average Minnesota household can expect to pay 73 percent more for natural gas this October than it did in October 2004, assuming normal weather, state officials said Thursday.

“In my 20 years of experience, I’ve never seen gas prices at this level,” said Vince Chavez, who supervises the Minnesota Department of Commerce’s Natural Gas Unit, which released the figures in St. Paul.

The October level, compared to this month’s prices, also represents the highest month-to-month gain ever in natural gas prices, Chavez said.

The department based its calculation on average residential consumption and on temperatures considered average for October over 30 years.

The prices also represent the average of what Minnesota utilities plan to charge in October.

“We don’t know what the gas is going to cost in November or December or January yet,” said Bruce Gordon, a spokesman for the Minnesota Department of Commerce.

CenterPoint Energy, the biggest natural gas provider in the state, with more than 770,000 customers, will charge 77 percent more on average this October, spokesman Rolf Lund said.

Minnesota gets its natural gas from Canada and mid-continent states, not from the Gulf Coast, where Hurricanes Katrina and Rita disrupted fuel production. Still, the storms drove up national commodity prices, especially natural gas, because Gulf gas production has been severely disrupted. That means consumers here will pay more for natural gas, too, as prices are heavily influenced by nationwide demand.

In Minnesota, natural gas will go for $1.31 per therm this October—more than triple the price four years ago.

A therm equals 100 cubic feet. The typical Minnesota household uses 59 therms during a normal October.

CenterPoint customers will pay $1.33 per therm, Lund said.

Statewide, the average residential natural gas bill in October 2001 was about $24 but will be more than $77 this October.

With oil around $66 a barrel, prices of consumer heating oil also are expected to remain high, as are propane prices.

Chavez urged people to cut their natural gas use with programmable thermostats and home energy audits and by weatherizing. Customers also can contact utility companies to set up payment plans that smooth out price spikes over the course of a year.

Nationwide, natural gas prices are expected to hover near record highs this winter—even if production recovers quickly from Katrina and Rita, because the hurricanes took production off line when companies normally would have been building up gas inventories.

“We had a tight supply-and-demand situation before the hurricanes,” Chavez said. “They have added an unknown factor that has the market just guessing on how much the damage will be. Nobody really knows, and the price is going up, just reacting to that unknown.”

Just remember when the bill comes, that it could be worse.

First, while there is concern that some spot shortages could develop in other states, gas companies here have bought enough product to meet demand all winter, Chavez said.

Second, people elsewhere will be paying even more.

“Our gas that we’re buying for Minnesota customers and their use is less than the delivered price to other hubs, including in the South,” Chavez said. “Minnesota has relatively lower prices in general.”