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HEATING BILLS TO SKYROCKET
RATES ARE UP 19% THIS YEAR

Even before winter's full fury hits the Buffalo Niagara region, this year's heating bills already are on a course that would make them the second-highest ever.

With supplies locked in a tight balance with demand, the rate that National Fuel Gas Co. will charge its more than 400,000 residential customers this month is 19 percent higher than it was last December and is the second-highest monthly rate that the Amherst-based energy company has ever charged.

If the rates hold at those levels and the weather is normal, then typical National Fuel customers can expect to pay roughly $1,023 to heat their homes between the beginning of November and the end of March, based on the company's projections.

That would make this winter second only to the bitterly cold winter of 2000-01, when gas costs soared to all-time highs and the average National Fuel customer paid $1,043 in heat bills. And heating costs would be $140 more than last year, when slightly warmer-than-normal temperatures helped to offset a sharp increase in gas prices.

The rate that National Fuel will charge its typical residential customer rose just 1 percent from November, but at $12.88 per 1,000 cubic feet, the monthly price is second only to the record $15.85 rate the company charged in January 2001.

"It's wholly attributable to higher gas commodity costs," said Julie Coppola Cox, a National Fuel spokeswoman.

Indeed, the commodity price of natural gas has soared by 51 percent over the last year, with gas for January delivery on the New York Mercantile Exchange closing Tuesday at $7.62 per 1,000 cubic feet, down almost 3 percent for the day but far above its $5.06 price a year ago.

"We're in such a tight situation between supply and demand right now, there are very few opportunities for relief from higher prices unless there's a more long-term solution," such as opening new areas to oil and gas drilling, Cox said.

Natural gas inventories are nearly 9 percent higher than the average over the last five years, which indicates that the nation entered the winter with a robust supply, according to the U.S. Energy Information Administration.

But with the nation's natural gas supply roughly enough to meet demand, there is almost no cushion for an unexpected spike in use, analysts said.

Analysts also were skeptical of the storage report. "We consider last week's report to either contain an error or simply be a one-time anomaly," Kyle Cooper, an analyst with Citigroup Inc. in Houston, said in a research note.

Regardless, National Fuel's rates are running at a rate that would be at least double the 5 percent to 10 percent increase this winter that company analysts were forecasting just two months ago, as commodity prices have continued to rise.

Natural gas prices make up about 70 percent of a typical customer's bill. National Fuel sells the gas to its customers at cost. It makes its profit through its delivery charges, which are negotiated with state regulators and account for about 30 percent of the typical bill. Those delivery charges have been frozen since 1997.

e-mail: drobinson@buffnews.com

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