September 7, 2003
Natural gas price hikes expected this winter
By KAREN A. DAVIS
SENTINEL STAFF WRITER
SAN FRANCISCO — People can expect to pay more to heat their homes this winter, according to Pacific Gas and Electric Co.
Natural gas rates will be 20 percent higher this winter than last due to increased demand for the fuel, utility officials say.
That’s bad news for area residents like Ron Hughes and business owners like Mustafa Farhat.
For Farhat, it costs thousands of dollars each month to run the 24 gas dryers and the hot water heaters that support 32 washers at his laundry Mama & Papa Bear Wash & Dry in Freedom.
"If prices keep going up for us, we’ll have to pass that on to consumers (at the laundry)," he said.
Farhat has considered reducing the drying time customers get for 25 cents from 10 minutes to 8 minutes. He also may consider increasing the $1.50 cost to wash a single load of clothes.
"(Natural gas prices) went up a couple of years ago — an enormous jump," said Farhat, who has owned his laundry for seven years. "Then it dropped down again. Hopefully, it won’t be as bad as it was then."
Utilities and consumers nationwide are already paying historically high natural gas prices, experts say. California residents’ rates are up 37.6 percent this month compared with a year ago.
PG&E, which serves the area from Bakersfield north to the Oregon border, buys the gas from producers at the going market rate and passes that same rate on to customers, plus a charge for transporting the gas, utility officials say.
Nationally, wholesale natural gas prices have doubled since last year, according to Marcel Hawiger, an attorney with The Utility Reform Network, or TURN, a San Francisco-based consumer advocacy group.
In the past, the group has spoken out against the role they say PG&E has played in gouging the 4.5 million Northern California consumers PG&E serves. Still, Hawiger agrees the utility has no control over market prices.
But, he says, the company should put "more effort and money toward promoting conservation and energy efficiency programs that reduce gas heating demands."
Also, he says the prices PG&E pays for natural gas are slightly higher than those paid by Southern California Gas Co., which serves 5 million customers in the south.
"They should try to do a better job at buying gas from the cheapest sources to hedge gas prices," he said.
Prices are high because natural gas has become increasingly popular for use in homes, businesses, factories and electric power generation plants, according to Michael Katz, PG&E’s vice president of California gas transmission.
"It’s a clean fuel, very economical and everyone’s been building gas-fired plants," he said.
Meanwhile, natural gas production has not kept pace with demand, according to Katz, who expects the problem to continue for at least three to four more years.
Natural gas prices have jumped nearly 64 percent this year to 55.4 cents per unit because of increased demand. PG&E charges an additional 37.5 cents per unit for transporting the gas, up 3.8 cents since last year.
Experts say there is no shortage of natural gas. The supply base is enough to last several hundred years, according to the U.S. Department of Energy.
Still, producers have seen declines in their existing wells as consumption has increased. Though some new wells have come online, they simply are replacing ones that have gone dry, not adding to production, Katz said.
As with many other commodities like strawberries or orange juice, the weather affects the market price of natural gas. A cold winter here or on the East Coast increases demand and drives up prices, according to Trista Berkovitz, PG&E’s director of gas procurement.
"The concern is, if we were to have a cold winter here (or elsewhere), that could cause prices to skyrocket," she said.
That concerns Ron Hughes, a 44-year Santa Cruz County resident from Felton. His family has dealt with the chill of high prices in the past by trying to conserve, he says.
"In December and January we try to use the fireplace to offset (natural gas) costs, but it doesn’t help that much," he said. "So we put on sweaters and I watch the thermostat really closely."
An average residential customer uses 23 units of natural gas each September. That means the average user’s natural gas bill would have been $15.53 last September. This month, however, they’ll be paying nearly $6 more.
Natural gas is the country’s fastest growing major energy source. U.S. natural gas consumption is expected to increase 50 percent by 2020, according to studies conducted by the American Gas Foundation.
Besides being used to heat homes, natural gas figures into the making of fertilizer, cars, steel, plastics and in electricity generation.
PG&E has several programs aimed at helping customers reduce their natural gas usage through conservation, energy efficiency rebates and discounts for consumers with low incomes, the disabled and senior citizens, according to spokesman Jeff Smith.
Though prices may be higher this winter, prices might have soared even more if not for the combination of mild weather and industrial cutbacks in recent months, according to Katz and Berkovitz. That reduced demand for natural gas slightly and allowed utilities to store record amounts of gas for use this winter.
Contact Karen A. Davis at kdavis@santa-cruz.com.
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