Esxperts predict a jump in natural gas, propane prices

With the dog days of summer beating down on us, staying warm is hardly a problem. But it might be this winter. As if last year's winter heating bills weren't high enough, all signs are pointing to an even greater hike this winter.

With their July bill, Missouri Natural Gas customers who participate in the Budget Billing program received notice that their rates would be increasing with the next bill. Budget Billing customers pay a set monthly rate based on average usage, which allows customers to avoid paying the bulk of their yearly gas bill during the winter months.

Not just Missouri

But it's not just the natural gas companies who are warning about an almost certain hike in winter heating bills. Last month, experts gathered at the Governor's Energy Policy Council in Jefferson City and warned natural gas bills could increase by as much as $100 this winter because of various reasons.

Warren Wood, energy department manager of the Missouri Public Service Commission, was among those speaking to the council.

"This is not only a Missouri problem. It's a national problem, as well," Wood said in an interview. "Natural gas is one of the most volatile markets that is tracked by the New York Stock Exchange. The price of natural gas is completely dependent and determined in a supply and demand market."

And that supply is running low while demand continues to climb -- a point reiterated in those notices sent to local natural gas customers.

Missouri Natural Gas Co., which serves natural gas customers in Butler County, is a division of the Laclede Gas Co. Laclede provides natural gas to several counties in eastern Missouri.

Budget Billing

According to Laclede spokesman Richard Hargraves, the average Budget Billing customer can expect their bill to increase by $35 a month.

He said Laclede will review billing amounts again in January if not sooner but at this point, there is no guarantee the billing amount will change.

Those who don't participate in Laclede's Budget Billing program were sent notices warning customers that the wholesale price for natural gas is higher than it was just one year ago and urged them to sign up for Budget Billing to avoid even more this winter.

"I don't forecast prices. In general, everyone believes they are going to go up. The question is how much," Hargraves said.

Hargraves cites different reasons behind the dramatic increase in prices, but it all comes down to supply and demand.

Natural gas companies typically purchase the bulk of their supply during the summer months when the demand for gas isn't as high as it is during the winter.

But demand for natural gas in the summer has increased dramatically in recent years because of electric-generating plants using natural gas, Hargraves said.

"This is a relatively new phenomena, but 25 percent of all the natural gas is being used for these plants," Hargraves said. "Now we find ourselves in a position where 25 percent of the natural gas is not being used to heat homes. It's being used to run air-conditioners in the summer. Demand is higher and a lot of that cheap gas we used to buy in the summer isn't there anymore."

Supply and demand

And the supply of natural gas is another market constraint, Hargraves said.

"There's plenty of gas out there. There's adequate supply. There's supplies off the shores on both coasts and in various parts of the country. The problem is getting government to grant [permission] to get it," Hargraves said. "The only way to lower prices is to increase supply. That's what a comprehensive natural energy policy would do and we don't have that."

These restraints on supply and demand for natural gas, coupled with the possibility of cold winter weather could leave many people struggling to pay their heating bills.

Hargraves said there are programs in place at Laclede and Missouri Natural Gas to help lower income people pay their heating bills. The Dollar Help program raised some $800,000 last year to help those who have exhausted public energy assistance funds. Customers can check a red box on their monthly bill to participate. They will be billed an extra dollar every month and that money goes directly into the program.

Hargraves also urges people who don't like paying so much more in the winter months, to participate in their Budget Billing program.

Propane's going up too ...

It's not just natural gas customers who might be facing bigger heating bills this winter. Odds are propane consumers will be feeling the pinch as well.

"Natural gas is the heartbeat of the winter fuel business. When it goes up, you see the other kinds go up," said Russ Philips, district manager at Home Service Oil Company in Poplar Bluff. "With natural gas and propane, these hikes happen every year and they get bigger every year. The consumer needs to plan ahead and buy now."

As with natural gas, short supply of propane is driving this year's jump in prices. The bulk of Missouri's propane comes from Canada -- and Canada is shipping less and less down its pipelines, according to Rick White, owner of White Gas Company.

"They are still rebuilding their own winter supply," White said. "And of course, we would be secondary on their list."

Fill tanks now

Philips and White recommend propane customers fill up their tanks now, while the price is lower, or participate in a budget billing program.

And if the customer pre-buys their winter supply of propane, the price will be locked in at its current rate until March 31.

Both companies, Home Service Oil and White Gas Company, offer customers the option of prebuying and fall-fill-ups as ways to save money.

With the prebuy programs, local propane suppliers buy the propane now, at the current price. That offers protection for the consumer from future hikes.

"And when the snow starts flying, a customer needs to have that," Philips said.