Wednesday, August 27, 2003

Natural gas prices a concern

During the 1990s, natural gas customers enjoyed relatively stable prices for clean, efficient natural gas. With a colder-than-average winter in 2002-2003, consumers saw significant increases in their heating bills. With tightened supply, there has been concern that pricing will remain high for the 2003-2004 winter.

"Gas prices are higher because there is more demand from electric generation and industry, and drilling hasn't kept up," said Kevin Madden, Executive Vice President, Distribution and Pipeline Operations for AGL Resources. "The United States has large natural gas reserves, so there is not a shortage, but most of this gas lies beneath federally protected lands or below the ocean. The wells currently in operation are aging and do not yield as much gas."

Supply has lagged, said Madden, due to a number of factors, including colder than normal winter weather, which has driven storage to record lows.

Although steps are being taken to increase supply, prices have risen in response to demand.

During summer months, natural gas is used primarily for manufacturing and electric power generation and, in the residential sector, for cooking and water heating. But during winter, residential heating requirements increase the total demand for natural gas in excess of production and import capabilities. This is why it is imperative for natural gas marketers to store extra gas during the summer for winter use, said Madden. If the price of gas does not drop during the low-demand summer months, then gas prices will be higher the following winter.

Natural gas bills reflect transmission and distribution costs in addition to the commodity cost.

For more information about how natural gas bills are calculated, consumers may visit www.atlantagaslight.com and click on "Guide to Charges: How to Calculate Your Rate." More information on pricing may be found at www.psc.state.ga.us.

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