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September 05, 2008

Update on Natural Gas Price Increases

If you live in Medford, Klamath Falls, or LaGrande, you're in luck when it comes to the cost of winter heating. Avista Corp., which serves those cities with natural gas service, will be raising their rates only a little to cover changes in the wholesale cost of natural gas. Customers of Cascade Natural Gas in Bend will feel a bit more of the pinch. And if you buy your gas from NW Natural in the Portland Metro area, you are still looking at a solid jump on those heating bills. The actual increases look like this:

* Avista 2%
* Cascade 11%
* NW Natural 25%

The good news is that these figures are quite a bit smaller than the utilities were forecasting a few months ago (and which we wrote about here). Just as the oil market has dropped, so has the natural gas market. With its unexpected off-season spike somewhat abated, most of us are breathing a sigh of relief - the 40% increase in gas heat some customers had been looking at would have devastated many Oregon households.

In addition to the drop in wholesale natural gas markets, customers of NW Natural will benefit from an additional $10 million reduction that results from depreciation of the value of NW Natural's pipes and other infrastructure, based on a recent analysis of the "useful life" left in the infrastructure. This depreciation reduction was due to go into effect - oh, just sometime later next year. CUB Executive Director Bob Jenks made a strong push for them to move the reduction up to January 1, 2009 to offset the significant increase NW Natural customers are going to be facing, and was successful, so that $10 million reduction will help mitigate whatever the final increase winds up being.

These figures aren't the final word on what we will see on our bills; the utilities will file one more time in October with market updates before the cost of natural gas passes into customer rates November 1st. In any case, those who do have natural gas heat for their homes should be thinking in terms of budgeting more, and perhaps setting up their bills on an Equal Pay program through their utility. Another wise move, which we have mentioned before, would be calling the Energy Trust (503-493-8888) as soon as possible to get a home energy review, so that you can see if your house can be tightened up a bit.

Natural gas isn't available in every Oregon town and city; it depends on the structure of the ground whether it is cost-effective for a gas company to put in the distribution pipes; where a thin layer of topsoil overlays many feet of hard granite or other rock, it is not so feasible. But where available, natural gas remains one of the more energy-efficient options for heat, and generally less expensive than fuel oil.

The huge increases and then decline in the natural gas market, much as with oil, points out some fundamental problems with the marketplace. A lot of people saw the runup as heavily influenced by speculators who bet on the futures market, and weren't even real-time users of natural gas. In addition, much of the gas in the American marketplace is Canadian in origin, so the speculators are hedging not only the future of energy costs, but also the strength of the American dollar in relation to the Canadian currency.

Whatever the combination of causes, the cost of natural gas has provided quite a roller coaster ride for energy analysts, and that show is coming very soon to a gas meter near you. If you're a natural gas customer, you might want to get ready.

Being CUB, we can't help pointing out that these increases just serve to underscore the importance of investing in energy efficiency, because it's true as it ever was, that the cheapest energy is the energy you never have to buy.

Posted by Oregon CUB at September 5, 2008 11:40 AM

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