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The Daily



06-23-03: Contract may not save funds for local gas users

The Daily Standard
    Natural gas customers living in St. Marys and Minster are hoping a new aggregation program will bring them lower energy expenses this winter, but it remains to be seen whether their hopes will be realized.
    An Ohio public utilities official is questioning whether any gas supplier will be able to offer a competitive price in the face of huge price uncertainty during the coming heating season.
    Donald L. Mason, commissioner of the Public Utilities Commission of Ohio (PUCO), testifying before the Congressional Committee on Energy and Commerce earlier this month, predicted sharp price spikes in Ohio for the next heating season. Prices could increase $2.50-$3 per thousand cubic feet of gas (mcf), Mason said, basing his assertion on personal discussions with statewide gas suppliers.
    For Dominion East Ohio customers in the Grand Lake St. Marys area, that would mean a price per mcf in the $10 range.
    That sets up a potentially problematic situation for gas customers in St. Marys and Minster. In those towns, residents are expected to be offered an aggregation contract sometime early this fall. But if the supplier contracts are based on forecasted prices, that means the initial aggregation offer might be more expensive than current prices. Then if prices do spike as expected, the contract might still represent a good deal, but residents wouldn't know that at first.
    Things could get a little confusing, but aggregation customers still should get a competitive offer, St. Marys Safety-Service Director Mike Weadock said.
    "We're going to get a competitive price at the time we get it. Whether that price will be competitive six months or a year later is a gamble," Weadock said.
    Making predictions about gas prices is an inexact science just like trying to guess prices of other tradable commodities, he said.
    Many statewide suppliers already are quoting winter prices in the $8-$9 range, Weadock said. Even if the aggregation offer ends up with a higher price than current Dominion prices, residents must realize that Dominion's prices also will rise during the winter, he said.
    In Minster, Village Administrator Don Harrod admitted that changing prices and the uncertain gas market could cause some residents to not participate in an aggregation contract. But village officials stand ready to provide residents with all the information necessary to make wise decisions, Harrod said.
    Minster officials put their operation plan for the aggregation program on the fast track at last week's council meeting, passing the issue as an emergency. Village officials did so specifically to try to get a contract price sooner, he said.
    Hefty price increases for gas seem unavoidable. Mason testified that gas going into storage right now for winter use costs suppliers about $3 per mcf more than it did a year ago. Suppliers have no choice but to pass those costs on to consumers.
    "People need to know the price is going up before they use the gas," Mason said. "This will help prepare them for the increases this winter heating season, thereby lessening the shock."
    Other factors could come together to push winter gas prices even higher, Mason said.
    "There is no good way of predicting what the cost associated with the spot market will be if the winter is a long, cold one without relief," Mason said.
    A hot summer also could play havoc with gas prices. Many electric generator peak-shavers used when electricity demand spirals in the summer run on natural gas. Therefore, a hot summer would tax gas reserves even more, leading to even higher prices in the fall and winter.
    In a worst-case scenario, officials in Minster and St. Marys could reject any and all contract offers if they are not favorable to residents.


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