The Star-Ledger

Homeowners Face New Hike In Natural Gas

Utilities seek rate increases up to 29 percent

The Star-Ledger — Friday, November 11, 2005

Star-Ledger Staff

Rising natural gas prices will force consumers to pay as much as $40 more each month this winter to heat their homes under rate increases requested yesterday by the state's four gas utilities.

The increases, which would take effect Dec. 14 and boost bills by as much as 29 percent, would mark the second time in less than three months bills went up because of the soaring cost of natural gas. Gas prices have hit record levels because less supplies are coming from the Gulf of Mexico in the aftermath of Hurricanes Katrina and Rita.

The state's biggest gas utility, Public Service Electric & Gas, is seeking the smallest increase of 15.6 percent. But that is little comfort to its 1.7 million customers, who already have seen their monthly gas bills jump by 10.6 percent this past September.

For a typical customer who uses about 200 therms a month, the latest increase would boost bills by another $40 a month to $292.11 from $252.44, according to the utility.

The alarming climb in natural gas prices has led the state and utilities to launch aggressive public education campaigns, with newspaper ads urging consumers to take steps to reduce their energy consumption this winter. Two-thirds of the homes in New Jersey are heated with natural gas.

"Prices for natural gas have continued to rise dramatically since we made our last filing," said Frederick Lark, PSE&G's vice president of business analysis. "Although we had purchased more than half of this winter's supply at lower prices earlier this year, we still need to buy more to meet customer demand. It's clear that the increase will not be enough to cover the cost of the additional gas we need to make sure our customers' homes are comfortable this winter."

The other utilities seeking increases include Elizabethtown Gas, which wants to raise its bills by 22.9 percent for its 260,000 customers, and New Jersey Natural Gas, which is seeking to boost bills by 23.2 percent for its 462,000 customers. South Jersey Gas, which has 300,000 customers, is looking to raise bills by 29 percent.

In New Jersey, utilities simply pass along the cost of purchasing the natural gas as a commodity, but make money on delivery charges. The cost of the fuel accounts for between 75 and 80 percent of the bill.

Typically, the state Board of Public Utilities approves the utilities' requests for commodity increases with few, if any, modifications.

Consumers will be hard hit by the latest increases, said Phyllis Salowe-Kaye, executive director of New Jersey Citizen Action. In September, the utilities were given increases ranging from 3 to 10.6 percent.

"How much more can residents bear?" she asked. "It just pushes more and more people into the category of not being able to pay for something else, like a checkup for their kid or replacing a torn winter coat, just so they can keep the heat on."

In its most recent forecast, the U.S. Energy Information Administration on Tuesday projected that consumers in the Northeast would pay 29 percent more this winter to heat their homes with natural gas, or about $276 more, according to Tancred Lidderdale, a senior economist with the agency.

"There's still a lot of gas productions in the Gulf of Mexico still offine," Lidderdale said. Close to 40 percent of the normal daily gas production in the Gulf is still shut down from the hurricanes, he said.

Natural gas prices have fallen a bit since peaking at $13.907 per decatherm in October, but are more than double the $6.123 per decatherm that the commodity was costing in June, when New Jersey Natural Gas made its initial filing for this winter heating season, officials said.

New Jersey Natural Gas, as do the other utilities, tries to hedge its position by locking in prices for natural gas during the summer, when prices are typically lower. By locking in about 80 percent of its anticipated natural gas supply needs, the company estimates it will save customers $140 million through the winter.

"While it's a small consolation for our customers, we have been able to hold this adjustment to far below the original estimated forecast by the U.S. Energy Administration," said Laurence Downes, chief executive of New Jersey Natural Gas.

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