National Fuel gas is giving consumers the option of locking in a portion of their winter gas costs at a rate 20 percent below last winter's, or of taking a chance on market rates.
The news comes just as a department of the U.S. Department of Energy projects that lower heating bills should be the norm this winter as natural gas, heating oil and propane supplies are considered ample.
Responding to a state Public Service Commission mandate that utilities develop a billing method to smooth out market swings in gas prices, National Fuel now offers a fixed-price option to its residential and small-business customers.
"The fixed-price option eliminates the variability in the gas adjustment to a customer's bill for a five-month period (December 1997 through April 1998)," said Donna L. DeCarolis, National Fuel's general manager for corporate communications.
The fixed price option is 13.832 cents per hundred cubic feet of gas, a number 20 percent lower than last winter's average price, but 30 percent higher than the cost two winters ago.
At the fixed-price rate, the average Western New York customer, who uses about 800 ccf during the December-April time frame, will spend $110.56 on the market-rate portion of their gas bill.
Customers also pay a base cost for natural gas of 31.5 cents per ccf -- or $252 on average -- which does not vary month-to-month. The monthly bill also includes the cost of providing service, again a variable cost.
At the new fixed-rate price, a National Fuel customer last winter would have saved roughly $31 out of the entire year's $1,055 average gas bill, according to National Fuel.
Consumers who sign up for the fixed-price plan must remember that their individual consumption is a major piece of the natural gas bill; the more you use, the more you pay.
"Last winter saw some of the highest prices in 10 years," Ms. DeCarolis said. "In the December 1996 to February 1997 period, prices were 18 percent higher than in the prior year."
Western New Yorkers may have been shaking their heads over the higher costs per hundred cubic feet because this area did not have a particularly tough winter, illustrating how what happens nationwide impacts the Niagara Frontier, according to Ms. DeCarolis.
"It was extremely cold in the Midwest last winter and natural gas buyers were waiting for prices to come down to fill their storage area," Ms. DeCarolis said. "It points out that companies like National Fuel, and their customers, when buying at market rate, are impacted by price spikes."
This year, in an effort to smooth out the pricing bumps, National Fuel has purchased about 30 percent of its natural gas at a fixed price from suppliers.
The state PSC sees the use of fixed-rate pricing as a stopgap measure, helping to protect customers from wild price fluctuations while waiting for open market competition to take hold.
"We see this as an interim step; now that the market is opened these types of things will be made available through the open market," said David Flanagan, a PSC spokesperson.
National Fuel's offer is made on a first-come, first-served basis and is limited to a maximum of 100,000 customers. Notices and enrollment forms are included in October bills.
The offers comes on the heels of the federal government projecting lower heating bills this winter.
The Energy Department's Energy Information Administration said Thursday that heating oil, natural gas and propane stockpiles are at higher levels now than this time last year.
Thus, homeowners nationally can expect to save about $20 over the winter on gas versus one year ago, heating oil users should save between $60 and $70, and propane users could save more than $90.