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Area natural gas users will bear the brunt of high bills this winter Experts warn that tight supplies coupled with hurricane-ravaged Gulf Coast facilities likely will force prices to rise to record levels this winter

David Tosetto can consider himself lucky. The cost of heating his company's 13 senior care facilities is going up a mere 15 percent this winter.

"Anybody who's been doing this for a long time wants to avoid buying their gas during hurricane season," said Tosetto, director of development for Elderwood Associates, which bought its natural gas for the winter in mid-summer. "If we'd tried to ride it out, it would have been devastating."

The average Western New Yorker won't be so lucky. National Fuel expects natural gas prices to increase about 31 percent this winter.

A typical National Fuel customer can expect to spend $1,236 on heating costs between November and March, the company estimates. That's about $293 more than last year. The projected prices are 19 percent higher than the previous record, set during the especially cold winter of 2000-01.

"This is going to be a difficult winter for our customers," said Julie Coppola Cox, a National Fuel spokeswoman.

Blame it on Hurricane Katrina's damage to gas facilities on the Gulf Coast -- and a long-term trend that leaves Rep. Brian M. Higgins, D-Buffalo, worried that Western New York's struggling economy will face more struggles for years to come.

Natural gas supplies are expected to remain tight -- and prices are expected to remain high -- through 2008. That means more people and companies in Western New York will struggle to pay their gas bills.

"I'm the representative of a community that's going to get devastated in the next several months," Higgins said of the high natural gas prices when he spoke at a congressional hearing last week. "And if we don't take more meaningful action, the problem is only going to get worse."

For the immediate future, the natural gas crunch spells trouble for people like Pascal J. Zendano of the Town of Tonawanda.

A World War II veteran living on a fixed income, Zendano said he wouldn't be surprised to see his gas bill hit $300 a month, up from $200 a month last year.

"They're hurting the seniors," he said. "Our checks don't go up. You can put your thermostat down and you end up with pneumonia. Or you just do away with something else."

> From bad to worse

And yet the natural gas prices seem unavoidable, the product of a tight market only made tighter by Hurricane Katrina. The storm shut down more than a third of the natural gas production in the Gulf of Mexico, which accounts for nearly a quarter of the nation's gas production.

"Things weren't looking great before the hurricane," Cox said. "But the hurricane is making a bad situation even worse."

Hurricane Rita, seen as a further threat to Gulf natural gas production later this week, is adding to the woes. Natural gas commodity prices, which account for about three-quarters of the overall bill paid by National Fuel customers, hit a record high on Monday before falling back slightly on Tuesday. Natural gas commodity prices, which already were up by almost 60 percent before Katrina hit in late August, have shot up by another 27 percent since then.

National Fuel customers are lucky the company locked in much of its winter gas supply before the storm, which is one reason why Western New York isn't expected to see the 71 percent gas price increases that the federal government projects in parts of the Midwest.

Programs are available to help people who can't afford their skyrocketing heating bills. But the biggest of those efforts -- the federal Low Income Home Energy Assistance Program -- won't come close to meeting this winter's needs, said George Coling, executive director of the National Fuel Funds Network in Washington.

Congress would have to set aside $3.4 billion for the program just to bring it up to 1981 levels, Coling said.

Higgins, Rep. Louise M. Slaughter, D-Fairport, and New York's two senators are pressing for that sort of big increase in funding. But the bills now moving through Congress would set aside no more than $2 billion for the coming year.

And that's going to spell trouble, Higgins said.

"People are going to end up choosing between paying their prescriptions and their heating bills," he said. "It's going to have such a ripple effect throughout the economy."

About 25,000 Erie County households received aid through the program last year, and Jim Panczykowski, Erie County's HEAP coordinator, is expecting a wave of applicants for heating aid as winter approaches.

"When you look at energy costs, prices are out of control," he said. "People are cash-strapped because of higher gasoline prices, higher prescription prices and rising health insurance costs."

While Panczykowski said the burden of high gas prices could fall especially hard on seniors, that's just the start of it.

Experts emphasize that the current price spike is just part of a long-term trend that could burden businesses as well as households for years to come.

Natural gas commodity prices have more than quadrupled over the past five years. Demand for the fuel has grown because of its increased use by businesses and factories as the economy strengthened, and as new power plants came to use the "clean fuel" instead of coal.

At the same time, gas production has struggled to keep up.

"It simply comes down to supply and demand," said Brian Youngberg, a natural gas industry analyst at the Edward Jones brokerage firm in St. Louis. "Production volumes are not going up and, at the same time, demand has grown, not just in the U.S., but globally."

> No change in sight

What's more, nothing is expected to change for years. There's little gas left to drill for in the United States, and imports from Canada and Mexico aren't meeting the growing demand, said Michael S. Zenker, senior director of Cambridge Energy Research Associates.

"Gas buyers and sellers are anticipating no real supply relief for the next few years, and, consequently, no price relief, either," Zenker said.

Significant supplies of liquefied natural gas, imported from the same countries where the United States gets most of its oil, could become available late in the decade, Zenker said.

But in the meantime, things could get tough for both residential users and big companies -- such as those in the chemical industry that depend on natural gas.

That leaves the nation facing some tough questions, said Rep. Darrell Issa, R-Calif., who chairs the House Government Reform Committee's Subcommittee on Energy and Resources.

"Are we facing a crisis in terms of adequate supplies and the effects of price on industry and employment?" Issa asked. "Will we be exporting more jobs?"

Witnesses at the subcommittee's hearing on those questions didn't provide clear answers to those questions, but Higgins said Congress shouldn't just wait around to see what happens. He's suggesting a new federal program that would aid cash-strapped companies with their natural gas bills.

Yet there's hardly a rush in Congress to focus on natural gas issue prices. In fact, only two House members Issa and Higgins -- sat through most of last week's hearing on the issue.

e-mail: jzremski@buffnews.com and e-mail: drobinson@buffnews.com

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