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Soaring Gas Bills Trouble Ohioans: Will Deregulation Bring the Cost Down?

Thursday, February 8, 2001 at 8:25 AM

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Many Ohioans are up in arms over the skyrocketing cost of natural gas this winter. Tales of heating bills that are double, even triple, what some customers paid last year abound. This comes at a time when a deregulated natural gas industry was supposed to usher in lower prices. That combined with the electric power crisis in California has some people wondering if deregulation is such a good idea. But the architects of Ohio's energy policies stand by them. In the first of two reports on utility deregulation, 90.3's Bill Rice reports.

Bill Rice- At this community meeting in Cleveland’s Lee-Harvard neighborhood, many residents are in shock over their recent gas bills. Jackie McCoy is one of them.

(to JM) Tell me why you’re here tonight.

Jackie McCoy- The increasing gas bills. I havn’t recieved mine as of this month, but I’ve talked to other people who received theirs. And I know when mine comes I won’t be able to pay it. I can’t afford it.

BR- What did your bill look like last month?

JM- Last month it was a $153. But from seeing everybody else’s I know it’s going to be three, hour hundred dollars for this month.

BR- Malcolm Wright, who says he’s lived in the Lee-Harvard area for forty years, has gotten his. And he’s not pleased.

Malcolm Wright- $95.38 in the middle of December, it went up to $280.84 in the middle of December up until today.

BR- The folks here are looking for answers as to why their gas bills have gone so high. Wright says he has a good idea.

MW- Deregulation is the one that messed this up, I think. Look at California.

BR- California has been on an electric roller coaster ride for months now. The state restructured, or deregulated, its electric power industry in 1998. The move was supposed to drive power prices lower by bringing competition to the market. But electricity charges to consumers and businesses in California have soared since then, and this winter Californians face acute power shortages. Many blame the restructuring for the crisis, and this has caused many to cast a cautious eye toward deregulation—not just for electricity, but for other essential utilities as well. Ohio State Representative Bryan Flannery is among the skeptics.

Bryan Flannery- We’ve deregulated the gas markets, we’ve deregulated the telephone industry, we’ve deregulated, now, electricity, and what you see happening is there can be tremendous problems caused through doing this to industries that people really rely on.

BR- But state officials who monitor Ohio’s energy industries defend deregulation, insisting that the competition it brings will ultimately benefit customers. Alan Schreiber is chairman of the Ohio Public Utilities Commission. He says the spike in natural gas prices is in no way attributable to deregulation.

Alan Schreiber- The reason that gas prices are high is because for the last 5 years we’ve had warm winters.

BR- Those warm winters drove demand for natural gas down, Schreiber says, and the price along with it. That dried up the incentives to drill for new gas, and supplies nationwide dwindled.

AS- Then this winter, November and December, were the two coldest months we’ve ever recorded. The demand shot up, the supply wasn’t there, and prices skyrocketed.

BR- Schreiber repeats what others have already speculated—that gas prices will decline in coming months—although, he says, he doesn’t expect them to decline to last year’s levels. Schreiber points out that the price of natural gas has been deregulated nationwide for more than 10 years, and compares the situation now with that of 25 years ago.

AS- If you think back to the seventies when there was very strict regulation, the federal government regulated well head gas, pipeline transportation, everything else—we had a worse predicament because not only were prices high, but there was no gas. I mean, no one likes the high prices today, but there is gas, and there’s plenty of it, and we haven’t gotten to the point where there’s a shortage.

BR- Others industry experts concur with Schreiber that deregulation is ultimately good for the consumer. Mark Stultz is Vice President of Public Affairs at the Electric Power Supply Association. He says it doesn’t matter which industry you’re talking about.

Mark Stultz- It’s the concept that a free market will provide the most efficiencies, even for essential goods and services.

BR- But, Stultz says, the free market does bring price swings, and that’s what’s happening with natural gas today. He says it’s happening nationwide, in both regulated and deregulated states, and that more competition, not less, will keep those price swings in check.

MS- It will minimize that, hopefully, and put downward pressure on prices if people have true competition and true choices for their suppliers. Now it does mean they have responsibility to choose and to come up with the best options for their needs.

BR- Stultz says that theory holds true in the electric industry too, which, in Ohio, has been deregulated for only a few weeks. Indeed, very little competition has been introduced thus far, and state officials say the potential benefits won’t become evident for some time. Bill Rice, 90.3 WCPN, 90.3 FM.

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