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06-23-03: Contract may not save funds
for local gas users |
By TIMOTHY COX
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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