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Archive for Tuesday, November 25, 2008

Natural gas price increase may not be as steep as expected

November 25, 2008

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Economy could ease cost of heating bills

A sputtering economy may bring some relief to your winter heating bills. Enlarge video

Maybe it won’t be the winter of our discontent after all.

When it comes to paying natural gas heating bills, consumers this winter may be less agitated than was once feared. Leaders with Lawrence’s largest natural gas supplier said Tuesday that a slowing economy makes it likely that heating bills won’t rise as much as previously predicted.

Leaders with Black Hills Energy — formerly Aquila — are predicting natural gas prices to be 10 percent to 15 percent higher than a year ago, they told city leaders at a Tuesday luncheon.

Not exactly news to jump up and down over, but it is far better than what many economists had been forecasting.

“Just a few months ago, we thought it was going to be as much as 40 percent higher,” said Ivan Vancas, Black Hills’ vice president of Kansas and Colorado gas operations.

Natural gas prices are down about 45 percent from their highs of this summer, following much the same curve of oil prices.

The underlying reason for the decline, Vancas said, is that a weakening economy likely will produce less demand for natural gas from large industrial users who can drive up the price of the commodity during good times.

Although the company is suggesting consumers plan for up to a 15 percent increase, the increase could be lower. Vancas said the company has already purchased about 65 percent of the gas it anticipates needing this winter. Thus far, the average price for that gas has been 6 percent higher than a year ago.

The company also has seen long-term weather forecasts that predict a less severe winter this year, which would drive down the amount of gas consumers would use.

But Black Hills also is planning on gas bills creating more strains on individual budgets. Company spokesman Curt Floerchinger said Black Hills offers payment plans during the winter for individuals who are having trouble staying current on their bills.

“Given the economy, we expect to deal with more people this year,” Floerchinger said.

From November through the end of March, state law also prohibits gas companies from disconnecting people if the temperatures are projected to drop below 35 degrees.

Comments

OnlyLawrenceRepublican 5 years, 10 months ago

Certainly. Natural gas prices are down 45% from the summer. They are 10%-15% higher than they were a year ago. The statistics are not related.Also, Black Hills does not sell you gas. They sell you a transportation service to get the gas to you through their pipes. The price of gas that you pay is a direct pass through, i.e. you pay exactly what the gas costs with no markup.

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been_there 5 years, 10 months ago

Then I must be confused, I thought Southern Star (formerly Williams) provided the transportation through pipes. Is Black Hills the local pipes and SS the statewide pipes?"Vancas said the company has already purchased about 65 percent of the gas " This statement seems to say they own the gas and resell it to us.

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OnlyLawrenceRepublican 5 years, 10 months ago

Southern Star owns the big pipes and Black Hills owns the local distribution system that transports the gas. Technically Black Hills buys the gas, but they don't "resell" it in the sense that their turning a profit. They buy it for X and then X shows up on your bill. The rest of your bill is the transportation charges and customer charge. Good point though.

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persevering_gal 5 years, 10 months ago

Don,Also, Westar Energy decided to increase the rate, because they want new faciities and up-to-date technology. I'm not happy with that, but unfortunately, that's how the system works with any city facility that wants to produce more efficient quality in the long run.

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