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Natural Gas Prices To Heat Up?

Thursday, January 8, 2004 at 11:15 AM

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Winter has fully arrived, and heating demands are at their peak. It's a time of year that can really smart financially - gains achieved over the spring, summer and fall can quickly fly up the chimney over the winter. In late 2003, Ohioans were bracing for an especially painful bite as energy analysts and the media trumpeted huge jumps in the price of natural gas. How dramatically will that impact your home heating bill? Not as much as the headlines might have suggested, but still, those bills will still likely be pretty high. ideastream's Bill Rice explains.

For Earl and Mary Simmons, soaring prices for natural gas was unwelcome news back in early December. The Simmons’s are both retired. They own a modest home in Ohio City, on Cleveland’s west side. Mary says she remembers well February of 2001, when Dominion East Ohio gas prices reached an all-time high.

Mary Simmons: I had a $451 gas bill that month. It about blew my mind.

Given the Simmons’s fixed income that winter lit a fire under Earl to make some improvements.

Earl Simmons: I put some regular insulation in the attic, around the floors, around the rafters, basement windows, I sealed everything up, painted the windows in.

Mary Simmons says the improvements helped. But for her and Earl and others like them, home heating is an annual worry, and a confusing one. In 2001 prices were to the moon, in 2002 and 2003 they moderated, this year they’re back up. Many are at a loss to understand the fluctuations. The short answer, say industry analysts, is supply, demand - and the weather. Ryan Lippe is with the Ohio Consumer’s Council.

Ryan Lippe: Gas prices at the wholesale level and at the consumer level have really been pretty high all year long. We’re just glad they’re not getting any higher.

That’s because this winter has so far been pretty mild, Lippe says. Demand has been low, inventories stable, and so the dramatic wholesale increases that made headlines in December have moderated. Weather, Lippe says, is the perennial wild card.

Ryan Lippe: And that’s why we see so much volatility at the wholesale level, with prices skyrocketing, and then they moderate, then they go back up again - is because there’s a fear factor there as to whether we’re going to have a cold winter environment or a moderate winter weather environment.

But prices are still considerably higher than last year. That’s the result of last year’s weather, not predictions for this year, says Neil Durbin, spokesperson for Dominion East Ohio.

Neil Durbin: We saw the consistently colder temperatures, they came early and often the last winter season.

Wholesale costs rose, but state regulations, which allow utilities to raise consumer prices only in three month intervals, held Dominion’s price more or less steady through the winter. That meant the company had some catching up to do come spring, and prices to customers shot up.

Neil Durbin: They hit the high for last year at 8.58 per cubic feet back in August.

Since then, Durbin says, the price has scaled back somewhat, and this year’s so-far mild winter has kept it from jumping again - in fact, it’s slated to go down another 11 cents per 1000 cubic feet in February. But that’s still high compared to last year, says the Ohio Consumer Council’s Ryan Lippe. And very soon people will start feeling it.

Ryan Lippe: What you see are people not really paying much attention to gas rates over the summer because they’re not using as much, but when they start firing up their furnaces and using more to stay comfortable in their homes or apartments, high rates that we saw over the spring and summer and fall are still with us.

For people like Earl and Mary Simmons, that means a lean year ahead.

Mary Simmons: For people on fixed incomes, you cut here and there to pay what you have to pay to keep things going.

And if you’re wondering whether heating costs will go up or down next year, you’ll likely get a clue over the next three months. Just keep an eye on the weather. In Cleveland, Bill Rice, 90.3.

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