Heat that sends chills

Sky-high natural gas prices send shock through central Illinois in form of heating bills

January 28, 2001

By OMAR SOFRADZIJA of the Journal Star

PEORIA - When Corinne Parlier peeked at the heating bill for her modest Peoria home this month, it sent a chill down her spine that felt colder than the frosty winter air.

"I got a bill for $322. I've lived here for 54 years. I never had a bill much over $100," she said last week. "I couldn't believe it."

In fact, the heating bill for the Flora Avenue home she shares with her husband, Raymond, was the most costly home expense they've ever had, with the exception of the house itself and siding work done awhile back.

Figure in a $700 car repair bill this month and the cost of caring for her cancer-stricken spouse, and it's been a winter of misery for Parlier. "It's mighty rough, really. I went out and got a prescription for him, and it cost about $200."

Another less-necessary prescription for $300 went unfilled. "He said we just can't do it," Parlier said. "That's all."

But her gas provider, Central Illinois Light Co., will get its money. "Those things, you have to pay," she said.

Not long after a summer of discontent over sky-high gasoline prices, residents throughout central Illinois and across the country are being socked with runaway natural gas prices that have tripled many heating bills in recent weeks.

"There's no discrimination on who it's affecting. It's a national energy crisis," said CILCO spokesman Neal Johnson. "This is unprecedented. It's going to be severe. It's going to have a significant impact on the way of life."

The crisis has left homeowners, renters and businessmen scrambling for cash, begging for payment plans or slashing expenses just to keep warm, while wondering what's behind the relentless price spike.

"It's highway robbery. It's terrible," Wilhemina Johns of Peoria Heights said of her growing heat bills, which have forced her to sit at home "in 62 degrees with socks on and extra clothing so I won't get cold."

"I guess I'll probably put it on my VISA. I can't afford it. It's terrible," said the 71-year-old, who's on a fixed income. "I'll try to figure it out this summer."

Others fear the price hike might have a dire effect on the nation's teetering economy by the time Peoria thaws out.

"We expect the typical Illinois household will pay an extra $400 or $500 more this winter for heat, given the cold weather and high prices," said Marty Cohen, executive director of the Citizens Utility Board, a consumer advocacy group. "That's $400 or $500 a household that won't be spent on food or clothing or entertainment, or saved in the bank.

"If you're looking at a straw to break the camel's back and send the economy into a recession, this very well could be it."

Why now?

While Johns thinks about how she'll pay her bill, others are trying to find a reason for the sudden spike. Illinois Gov. George Ryan formed an "energy cabinet" and ordered the Illinois Commerce Commission to start a gas-cost inquiry.

"We are looking at it now," ICC spokeswoman Beth Bosch said. Her agency huddled with natural gas industry producers, distributors, customers and analysts last week, in hopes of finding a reason for the explosion in gas costs.

"We don't know what's behind it. ... We know the per-therm price for gas has probably tripled for most of the utilities in the state," Bosch said.

The numbers bear that out. The average CILCO residential customers in Peoria and Pekin who use 235 therms of natural gas - a typical monthly wintertime amount - will see their bills jump from $69.13 last February to an estimated $236.76 next month, a jump of more than 240 percent, according to rates reported by the ICC.

A typical Bloomington-Normal or LaSalle-Peru homeowner who subscribes to Nicor will have a bill that jumps from $75.71 last February to $218.62 next month, nearly 190 percent higher.

A typical Galesburg resident relying on Illinois Power could pay $167.03 next month, compared to just $70.33 last February. And a Macomb resident getting gas from AmerenCIPS could see a $185.39 February bill that was $85.28 last year.

One theory gaining popularity doesn't blame this crisis and last summer's gasoline price spike on a lack of gas in the ground. Rather, it points to a lack of rigs to bring gas to the surface and a shortage of refineries to process it.

The American Gas Association, a Washington, D.C.-based trade group, said low prices in the late 1990s took the profit incentive out of drilling for gas and caused the number of rigs to sharply dwindle.

As production dipped, so did reserves. Going into the winter, gas stocks were down nearly 12 percent from the norm, according to the U.S. Energy Information Administration.

When this winter made a record-cold start, with December temperatures hovering around zero, natural gas demand skyrocketed. Combined with little supply and meager production capability, prices took off.

CILCO's Johnson said the unwieldy natural gas industry is ill-prepared to handle surprises.

"The industry doesn't respond like it does ... at the gas pump," he said. "If OPEC raises its price on Tuesday, on Wednesday the price is showing at the pumps. The (natural) gas industry has a six- or seven-month lag because of the type of fuel and delivery."

The ICC has no sway in the matter. "We don't set the price of fuel. It's a deregulated market," Bosch said. "What we are seeing is a market at work."

Cohen, at CUB, said that's a lame excuse. "All that's true, but for the gas industry to say to consumers, 'There's no problem at all, this is just the way it works, tough for you,' that's an inadequate response.

"This is not a natural market at work. This is a market that's not working in the interest of consumers," Cohen said. "It's hard to believe the gas industry wasn't aware we had a booming economy and increased demand for gas."

For their part, utilities say there's little they can do.

"When we purchase gas, we purchase it on the open market. We're a distribution company, not a production company. We are at the mercy of the market, like everybody else," said Nicor spokesman Craig Whyte, whose utility serves McLean, Livingston, Putnam, LaSalle and Bureau counties in central Illinois.

'I can't live'

To Julie Crotzer, it doesn't make sense. She works long hours to only marginally heat a house she's never in because she has to work all the time to pay the heating bill.

"I live alone. I work 75 hours a week in home care. I'm never even there, so I turn my heat down to 55 or 59" degrees, the 56-year-old home-care aide said. "I'm gone two nights a week and five days a week."

But that hasn't kept the heating bill for her two-bedroom rental home on Pekin's Jane Street from ballooning from $76 in November to $170 in December and an eye-popping $297 this month.

"I called CILCO about it. I was devastated. I can't live. That's almost as much as I make in a week," she said. CILCO offered her an installment payment plan that requires a level $181 monthly payment until June.

"(Spending) $450 on rent and $300 on utilities and my car payment doesn't leave you much left," she said. "When is this going to subside?"

Not soon enough for Crotzer or the Peoria woman she cares for. "Her bill was $500. And she's by herself. Eighty-nine years old. She just sits and wears double sweatshirts and double sweatpants," Crotzer said.

Even people without heating bills feel the heat of higher prices. At the 60-unit Knoxville Manor apartment complex in Peoria, where heat and hot water are provided, managers instituted a $20 per month heat surcharge from December to March.

"We're not making up the whole difference. But it helps a little bit," owner Bob Silberstein said. "We're absorbing some of the cost ourselves."

If the full cost of higher gas was passed onto tenants, "It would definitely be more" than $20 per month, he said.

Some people just can't pay for higher gas now. Nicor's Whyte said his utility has seen a "tremendous" increase in people seeking payment plans. Roughly 100,000 of Nicor's 2 million customers in Illinois signed up for a level-payment plan just this winter.

And CILCO's Johnson said his utility has seen a 20 percent increase in call volume from customers. "They're seeing sticker shock from the bills," he said.

People aren't keeping the bad news to themselves.

"Every day, people talk. Not a day goes by without someone saying, 'I got my CILCO bill today. Good gosh!'" said John Balanco, owner of Mulligan's Bar & Grill in Peoria.

A budget burden

Balanco invested in extra insulation, a new roof and computerized thermostats for his bar last summer. But that didn't keep his gas bill from hopping to $1,300 last month, a 136 percent increase from the $550 he paid in December 1999.

That difference is going to come out of his bottom line.

"There are so many bars and restaurants in this town, there's no way we could add 20 cents to the price of a drink," said Balanco, adding he worries that high gas bills will lead customers to cut back on discretionary spending, further cutting into his revenues.

Balanco's bar isn't the only business hurting from the hike.

Keystone Consolidated, the parent company of Keystone Steel & Wire in Bartonville, reported $1.8 million in additional natural gas costs in the third quarter of last year that contributed to a $3.1 million overall quarterly loss.

Peoria's Hotel Pere Marquette saw the cost of heating its 288 guest rooms, restaurants, bars, meeting space and public areas jump by 40 percent in the past two months, hotel general manager Bill Carter said. The hotel has since been trying to trim costs.

"We've tried to shut down whole guest floors when we could," Carter said. "That's nickels and dimes, but that's what we have to do."

Peoria County government, which had to spend $60,000 in contingency funds to cover the rising cost of gasoline last year, is expected to go $140,000 over budget to pay for higher natural gas costs this winter.

Peoria Public School District 150, already facing a future cash crunch, saw its December heating bill that traditionally has been less than $80,000 go over $200,000 last month.

And Peoria's Crittenton Centers, which oversee a 100-child day-care center and a crisis nursery that serves more than 400 kids each year, saw its heating bill of around $4,500 in November turn into a $9,300 monster last month.

"We'll just try to do some additional fund-raising," executive director Frank Shepke said. "It's certainly going to have an effect. The more we have to pay for that, the less we have for clients and staff."

Meanwhile, suppliers of unconventional heat sources have seen a boom in business. "We've picked up a lot of customers looking to supplement CILCO's heat with firewood," said Brian Bauernfeind, co-owner of City Coal and Asphalt in Pekin, a firewood supplier.

Troubles ahead

CILCO won't disconnect people's heat due to delinquent accounts during the wintertime. But that has some officials worried that a spring thaw will bring a rash of blacked-out homes.

"Come March, April, when some families haven't been able to pay these bills for a couple of months and the lights go off ... the city could be looking at a large problem," Peoria City Councilwoman Gale Thetford said at last week's council meeting.

That's something that social service agencies expect. "People are very aware that CILCO is not going to turn their heat off in the dead of winter," said Linda Hilst, spokeswoman for the Heart of Illinois United Way. "So they put their money toward other bills."

Said Peoria YWCA spokeswoman Jeanne Kimball: "Come March, we'll see a big increase in the number of people coming for help."

And a squeeze in natural gas stocks this year could roll over into next winter, possibly setting the stage for a repeat of heating price shock. The storage of natural gas is now 20 percent lower than last year.

That could mean summer demand will be high just to store for next winter. And continued high demand could spur on high prices.

"No one knows what the future would be, but I don't think anybody is thinking it'll go down next year," Bosch said. "It'll probably stay in this area for a while."

The natural gas crisis also is likely to hit the heartland's farms. Nitrogen fertilizer, made from natural gas, is in short supply and more expensive. That could cause a crunch come spring's planting season, driving up the cost of farming and reducing already-slender margins for farmers.

CILCO's Johnson said his utility projects some price relief, "but not anytime soon. Any relief in the summer months won't help us now. There's no short-term fix for a long-term problem" of shifting demand and inadequate production.

Bosch said the ICC study, set for completion in April, could lead to a statewide energy policy in hopes of blunting future price shocks. "Some legislation may be needed to affect the energy supply. I don't know what that will be."

CUB's Cohen is keeping a careful eye on who does what.

"The industry is saying, 'Just leave us alone and let the market work.' Well, they've been left alone, and the market has worked to the detriment of consumers and the economy," Cohen said. "If prices don't moderate and supplies don't improve, they'll get the government intervention they fear."

Reporters Dayna R. Brown, Jennifer Davis, Reid Epstein, Paul Gordon, Angela Green, Clare Howard and Steve Tarter contributed to this report.

http://www.pjstar.com/news/topnews/cop53a.html

-- Martin Thompson (mthom1927@aol.com), January 28, 2001

Answers

Worst impact of natural gas prices may not hit until weather warms up

January 28, 2001

By PAM ADAMS of the Journal Star

We may already know the most tragic home heating story of the season.

On Christmas Eve, Sherlane Chambers, 60, turned on the oven to help warm her basement apartment along Ravine Avenue. Fire officials say the heating oven led to the blaze that killed her and left six families homeless over the holidays.

But we may not see the worst impact of high natural gas prices until April - when utility companies typically begin disconnecting residential service for delinquent payments.

Spokesmen for government agencies, social service programs and consumer groups say they can't predict how many people will be affected, but they expect serious, potentially dangerous, repercussions - from homelessness to fire hazards.

"I don't want to imagine how many people will be shut off this year," said Rosie Smith, coordinator of the Community Action Agency's energy assistance program for low-income families. "If people can't afford to pay $700 bills now, can you imagine?"

That reality may arrive with the season's first flowers.

"What happens in the spring is one of the big unknowns of the whole crisis," warned Wayne Curtis, administrator of the Department of Commerce and Community Affairs program that administers energy assistance funds throughout the state. "Unknown" not only refers to the numbers affected, but also to the amount of emergency money available to help them.

"This presents a number of safety issues for the fire department," said Peoria Fire Chief Ernie Russell, detailing a range of risky and peculiar heating or lighting alternatives people have used when power was disconnected.

In particular, Russell recalls a man who tried to keep warm by lighting 50 to 70 candles around the house. "I'm not saying people are stupid, but they do get desperate."

Though energy utilities are not specifically prohibited from disconnecting service during the winter months, Illinois Commerce Commission rules bar them from disconnecting service as long as the temperature is below 32 degrees. Once temperatures hold at 32 degrees for more than 24 hours, they can start sending out shut-off crews.

The number of shut-offs typically increases right before and right after the "so-called moratorium," usually around October and April, said Patricia Clark, associate director of the Citizens Utility Board, a consumer protection agency.

Energy companies offer a variety of flexible pay arrangements to help customers avoid disconnection. More programs and more energy assistance funding are available this season than ever, said Molly Hall, spokeswoman for Decatur-based Illinois Power Co.

"There's no reason for a customer to reach that point. Our focus is on helping people avoid getting to that point," Hall said. "Disconnections are a last resort."

But there also are foreboding signals. For comparison's sake:

¡Central Illinois Light Co. disconnected almost 1,200 customers last March, the end of a milder winter with much lower natural gas prices.

¡Illinois-American Water Co., a utility that can disconnect service throughout the year, has seen an approximate 33 percent increase in delinquencies since November.

Typically, if people have to make tough financial choices in the winter, they'll pay water bills instead of energy bills, according to Ernestine Williams, coordinator in the Salvation Army's family services division. That unit helps people pay water bills through Illinois-American's H2O (Help To Others) program.

"To take it a step further," Williams said, "I've seen people end up in shelters because they couldn't keep up with rent and utilities."

The water company hasn't cut services recently because meters were covered by snow. It probably will resume disconnections in February, according to spokeswoman Sue Atherton.

¡Unlike years past, more people with middle-class incomes are inquiring about energy assistance.

"We've had many, many people call who don't meet income guidelines - one man made $40,000 a year," said Martha Ross, manager of the United Way's Community Link and Volunteer program.

Furthermore, families who received energy assistance between September and November, before the latest batch of high-cost bills came out, are not eligible for any more money, other than an amount equal to 15 percent of what they originally received.

Again, for comparison's sake, the CAA already had helped 2,600 families before December's high heating bills.

"If people have already gotten energy assistance, they can't reapply unless service is disconnected," said Smith, coordinator of the CAA's Low-Income Home Energy Assistance Program, or LIHEAP.

Since then, energy bills have doubled or almost tripled in many cases, she said.

The CAA provided emergency assistance for shut-offs to 387 families last year. A household can receive up to $750 to get service restored, but they have to show they've spent at least 10 percent of their total income on energy bills over the past 90 days.

"We're talking possibly of four to five months of high bills - that could be $2,500," Smith said. "The most we'll be able to pay for shut- offs is $750, and we can't pay that if the household can't come up with the balance."

The emergency assistance program ends in May, but households still will be getting disconnected in June, July and August, she said.

Though each utility company keeps track of its own disconnection statistics, neither the Illinois Commerce Commission nor DCCA's LIHEAP program has figures on the number of disconnections due to delinquent payments. (The ICC does have totals, which include disconnections for moving or other reasons.)

Jim Benfield, of the Campaign to Keep America Warm, is surprised the ICC doesn't have a breakdown in disconnection figures.

"How can you make policy if you don't know what's going on?" he said.

In Colorado, for example, statistics showed nonpayment of utilities is second only to nonpayment of rent as a cause of homelessness.

"That's needed information," Benfield said. "Policy makers need to know that kind of stuff."

http://www.pjstar.com/news/topnews/cop265a.html

-- Martin Thompson (mthom1927@aol.com), January 28, 2001.