Surging Utility Bills to Force Tough Decisions This Winter

greenspun.com : LUSENET : Grassroots Information Coordination Center (GICC) : One Thread

Surging Utility Bills to Force Tough Decisions This WinterSome Reasons Behind the Increases Source: Omaha World-Herald Publication date: 2000-08-12

Linda Foster's eyes popped when she opened her "budget bill" notices from KN Energy Inc. and PACE this summer. The bill for her business, the Print Shop in Cambridge, Neb., showed a 55.4 percent increase. The bill for her home was up 76.6 percent.

"I expected it to go up, but that's ridiculous," Foster said.

It figures to be a long, cold winter for Foster and other Nebraskans and Iowans, at least financially. Foster found out early, since she's on a level payment plan that factors in winter's higher heating costs on her bills throughout the year. For others, the shock will come later.

This winter's heating bills will be up sharply from last year - by 50 to 70 percent, according to some estimates - partly because of the mild weather last year and partly because natural gas prices have more than doubled.

Some people will adjust by lowering their gas use. For example, Rob Eaton, who along with three siblings owns and operates Eaton's Floral and Greenhouse in Wakefield, Neb., plans to shut down part of his 25,000-square-foot greenhouse during cold-weather months.

Others will have to make harder choices, such as whether to stay warm or eat less.

Two Iowa State University professors, Drs. Joyce M. Mercier and Cletus R. Mercier, mailed surveys to Iowans who received government assistance last year on their utility bills. Of the 3,661 people who responded, 12 percent cut back on food to pay fuel bills, more than 20 percent went without medical care, and nearly a third put off paying other bills.

With prices much higher this winter, the impact will be greater.

"They're being forced to decide what basic necessities to forgo in order to pay their heating bills," said Jim McKim, chief of the bureau that dispenses federal energy assistance for the Iowa Bureau of Human Rights.

McKim, who is trying to get more funds for energy assistance this year, said the booming economy is one of the causes of higher natural gas prices. Most Americans benefit enough from the good economy to make up any energy-price increases, he said, but low-income people aren't so lucky.

"Obviously, our low-income folks are bearing the pain created by that demand," McKim said. "Everybody else is just grumbling a little."

Utilities are sending out notices to let customers know that costs will be higher this winter.

"We have to do our best to try to explain what the factors are and how we fit into the natural gas equation," said George Minter, a spokesman for Kansas City, Mo.-based UtiliCorp United Inc., whose Peoples Natural Gas unit serves parts of Nebraska and Iowa. "We want the customers to be ready."

The company is printing newsletters on the rate increase and meeting with community groups and regulators. For utilities, Minter said, reliability is the most important factor because customers depend on a ready supply of natural gas all winter, no matter how cold it gets and no matter how high prices go.

Minter said customers should understand that local utilities don't make a bigger profit as the price of natural gas rises. Peoples and other utilities make their money by distributing gas to customers, and the cost of that service is subject to state or federal regulators. Natural gas costs are passed through to consumers.

Metropolitan Utilities District in Omaha has estimated that its customers will pay an average of 69 percent more to heat their homes this winter, factoring in both higher gas costs and the fact that last winter was mild.

Dewey Zerr, retail leader for KN Energy Inc. in Scottsbluff, Neb., said heating bills could be up 50 percent or more this winter for KN's customers.

Zerr said he has had a few comments from customers about the higher rates. "I'm sure our clerks are hearing comments and answering questions."

KN Energy, a division of Houston-based Kinder Morgan Inc., serves 160,000 households in central and western Nebraska.

Cambridge businesswoman Foster said she talked with KN Energy representatives about the increases in her monthly bills, 76.6 percent at home and 55.4 percent at her business. She realizes that she will end up paying only for the natural gas she uses, but she said the size of the expected increase doesn't seem justified.

Les Meyer of Kearney, Neb., business relations director for KN's retail operations, said the increases in Foster's budget billing amounts probably are higher than the 40 percent average because she did not build up much of a "cushion" of money during the late spring and early summer months, even with last year's relatively mild weather.

That means she will likely use much more gas in the coming year, on top of the gas-price increase.

For the budget billing plan, the company tries to calculate an amount that will cover the cost of the natural gas that a customer uses, Meyer said.

Tim Grabinski, director of communication services for Des Moines- based MidAmerican Energy Co., which serves most of Iowa and parts of Nebraska, said the price of natural gas has nearly doubled in recent months, and customers can't count on another mild winter.

MidAmerican is encouraging customers not to simply wait for the higher costs. Now is a good time to add weather stripping, to caulk leaks and to take other energy-saving steps, Grabinski said.

Gary Lay, director of marketing for NMPP Energy in Lincoln, said his organization has been sending information to customers around Nebraska about higher natural gas prices.

NMPP, which traces its history to the Nebraska Municipal Power Pool, operates the Public Alliance for Community Energy. Regulated by communities, PACE gives Nebraskans a choice in natural gas suppliers to distributors like K N Energy.

Like other consumers, people who chose PACE will pay higher prices this year, Lay said. More than 17,000 people in 64 communities get their gas through NMPP, most of them using PACE. Lay said customers are getting the word about the higher prices.

"They don't like it, but neither do we," he said.

Bill Rayer, owner of the Black Horse Inn and the Drover's Steak House in Creighton, Neb., figures higher gasoline prices in recent months have added 10 percent to his food costs. With utilities accounting for 20 percent of the expenses at his motel and restaurant, he figures that higher natural gas prices "could add up to quite a bit of money."

"So far we've been eating it," Rayer said, "but if it gets much worse, we're going to have to find a way to pass it on to the customers. That's what causes inflation, when they keep doing that."Some Reasons Behind the Increases The American Gas Association says today's higher natural gas prices result from:High Demand: With U.S. industry humming along in a strongeconomy, natural gas use is up sharply. Also, high petroleumprices prompted some industries to switch from fuel oil to natural gas. Plus, new natural gas-fired electricity plants,which create less pollution than coal-fueled plants, are comingonline.Less Supply: Mild temperatures the past two winters caused lowprices, discouraging exploration and new production. Although the situation has reversed and more rigs are drilling for natural gas now than at any time during the past 15 years, it will take a year for those new wells to begin producing.

Less Storage: High prices discouraged utilities from buying andstoring gas this summer. Although supplies are adequate for the coming winter, some utilities are having to buy natural gas now at the higher prices and may buy more this fall.

http://cnniw.yellowbrix.com/pages/cnniw/Story.nsp?story_id=12815253&ID=cnniw&scategory=Energy

-- Martin Thompson (mthom1927@aol.com), August 12, 2000


Moderation questions? read the FAQ