Starnews.com > Opinion

High gas bills are last gift of Bill and Al

Commentary by Larry MacIntyre

Indianapolis Star

January 10, 2001

An unpleasant surprise awaits Hoosiers as they open their home heating bills for the unusually chilly December just past. It's a double whammy. Not only are they paying record high prices for natural gas, most households are using twice as much of it as last winter.

That is adding up to budget-busting increases of double and even triple what folks were paying a year ago to keep their houses warm.

I was lucky. My home gas bill jumped by a mere 113 percent, from $71 in December 1999 to $152 last month. I can thank good insulation.

More typical was the experience of Mike Roeder, a spokesman for Indiana Gas Co., who is admitting to reporters that his home gas bill jumped 155 percent, from $78 a year ago to $198 now.

Most people's first reaction will be to blame the gas company. It is the wrong target. Mother Nature deserves some of the blame, but a hefty portion of the higher bills (about a third) really ought to be viewed as a sort of farewell gift from Bill Clinton and Al Gore. Eight years of a myopic energy policy have finally given Americans the inevitable: energy prices that only a Sierra Club member could love.

And it's a gift that will keep on giving for a couple more years, even if the next couple of winters are mild and the wellhead price of gas comes down out of the stratosphere.

Conflicting energy and environmental policies during the Clinton-Gore era combined to encourage consumption of gas, at the expense of coal, while limiting the ability of producers to find new supplies of gas.

It was a recipe for an energy disaster, and the only surprise is that it took so long to come to pass.

During the Clinton-Gore years, many of the nation's most promising gas fields offshore and in the Rocky Mountains were closed off to drilling and energy exploration to appease the environmental lobby. The National Petroleum Council estimates that about nine years' worth of gas supply have been put off limits.

Existing gas fields have been running low in recent years, but the shortage wasn't immediately noticeable because of three consecutive mild winters. That kept wellhead prices in the normal range of $2 to $3 per decatherm of gas (1 million BTUs).

Meanwhile, more and more drillers were giving up on domestic exploration because the prices of both gas and oil were too low to enable them to obtain financing to drill new wells.

As this was going on, Gore's obsession with global warming was driving a federal holy war against coal-fired power plants. Lawsuits and absurdly restrictive regulations issued by the Environmental Protection Agency were making it difficult for electric companies to continue operating their coal-fired power plants, much less build new ones.

Instead, they began dotting the landscape with smaller, gas-fired plants that consume huge amounts of fuel when they are operating. It's one of the main reasons U.S. consumption of natural gas has been rising at 5 to 10 percent a year.

Someone in the Energy Department should have figured out that the consumption and production lines on the national energy chart were heading for a collision course. It took just two unusually cold winter months to trigger the crash.

The wellhead price of natural gas jumped from about $3 per decatherm (1 million BTUs) to $9 to $10. In California, where much electricity is made from gas, the price has even hit $50. That's one of the main reasons the state has a severe power shortage and its two largest utilities are on the verge of bankruptcy.

Fortunately, we're better off in Indiana, but not by much. We're going to be paying high gas bills for a long time. That's because our gas companies can't pass through the additional cost of gas all at once. It's spread out over 12 months.

For instance, the Indiana Utility Regulatory Commission is allowing Indiana Gas to charge its 490,000 customers $5.41 per decatherm. But right now, Indiana Gas is paying $9 to $10 on the spot market, compared to $2 to $3 a year ago.

Over the next four quarters, Indiana Gas will seek rate adjustments to cover the shortfall. Citizens Gas, which serves 285,000 customers in Marion County, is facing a similar dilemma. Looked at another way, we're all buying a big share of this winter's gas on credit. We'll be paying it off in installments all through next winter. It's the American way.

http://starnews.com/articles/ecolmacint0110.html

-- Martin Thompson (mthom1927@aol.com), January 11, 2001