The crushing natural gas bills arriving in the mail this month will be a little less painful next month because of a 24 percent drop in rates announced Thursday.
But don't start celebrating. The price is still 54 percent more than what residential customers paid in February 2000. At $12.15 per 1,000 cubic feet, it's the second-highest price consumers have ever faced in the region.
January's record-high rates have National Fuel Gas Co.'s roughly 500,000 residential customers in Western New York reeling.
"We're thrilled the rate has come down," said Julie Coppola Cox, a National Fuel spokeswoman. "It's a good signal, but no one's going to predict what's going to happen next."
If February's weather is normal, a typical residential customer can expect to pay about $244 this month, or about $87 more than a year ago.
That's on top of the sky-high heat bills that Western New Yorkers already have endured since the end of October, when unusually cold weather caused consumers to use more gas than normal.
Even if this month's weather is perfectly normal, the average National Fuel customer will have paid $199 more to heat a home from November through February than the $661 it cost for gas during the entire five-month heating season a year ago, when gas prices were low and the weather was unusually warm, Cox said.
Still, February's lower rates are the first bit of good news that National Fuel's customers have received this winter, as moderating temperatures during January cut into the demand nationally for gas.
In Western New York, temperatures were 3.3 percent lower than normal during November and 20.1 percent below normal in December. Temperatures ran 8.7 percent above normal in January.
With the mild weather across the northern United States reducing the demand for gas used for heating, commodity prices for natural gas on the spot market have fallen sharply this year, tumbling by 45 percent Thursday to $5.78 per 1,000 cubic feet after peaking at $10.50 at the end of last year. But gas prices still are more than triple what they were at the beginning of last year.
"Gas prices appear to be returning to more reasonable levels," James Beck, president of National Fuel's oil and gas drilling business, said in a conference call with analysts earlier this week.
Gas prices soared late last year as unusually cold weather swept across the northern part of the country, driving up demand for natural gas at a time when gas inventories had dwindled to their lowest levels in at least seven years.
Firms had been reluctant to put natural gas into storage last summer because the rising demand for gas, fueled in part by new gas-fired power plants, had kept prices high during the warm weather months that typically are used to build up stockpiles for the winter.
The amount of natural gas in underground storage is 30 percent below last year's levels and 27 percent less than the average over the past five years, according to the American Gas Association. Analysts expect inventories by the end of winter to fall to the lowest levels since the group began tracking them in 1993.
In addition, low natural gas prices in the late 1990s caused energy companies to drill fewer new wells and cut back their production, leaving supplies short at a time when demand was growing.
Demand for natural gas rose 5.2 percent last year, while supplies from domestic wells and Canadian pipelines increased just 1.3 percent.
The surge in gas prices has sparked a flurry of new drilling, with 40 percent more drilling rigs in operation at the end of last week than a year ago, according to Baker Hughes, a Houston oil and gas drilling services firm.
But it can take six to 18 months before drilling actually increases the available supply of gas. And some producers, including National Fuel, have indicated that it could take longer than expected for new wells to come on line because of a shortage of drilling rigs.
As a result, the U.S. Energy Information Administration predicts that gas production will rise by 5.4 percent this year, while demand will grow by 2.9 percent.