MERIC NEWS LETTER

Warmer Weather Lowers Projections for Costly Winter

Warmer than normal temperatures in Missouri have given consumers some optimism when their heating bill arrives. Considering the gloomy news early in the winter season that heating bills would nearly double from last year, any sign of relief is good news.

The good news for consumers came recently from the Missouri Public Service Commission. On January 10, new figures from the commission indicate the projected increase will be less than previously anticipated. The estimated increase this winter (November 2005-March 2006) from last winter (November 2004-March 2005) is now projected to be 33 percent more than consumers paid just one year ago.

While the news isn't cause for celebration, as recently as November 2005, the commission estimated a 44 percent increase in heating costs for this winter compared to last.

The estimated total bill Missourians can expect to pay on average this winter is $879, up from the estimated cost for last winter of $662.

Though Missourians use a variety of fuels to heat their homes, the primary fuel used is utility gas, which generally comes in the form of natural gas.

According to the U.S. Census Bureau's 2004 American Community Survey, an estimated 57 percent of Missouri households use utility gas to heat their homes.


Source: 2004 American Community Survey/Figures are estimates

 

Cost by Company
The difference in costs varies among Missouri energy companies, which more or less service specific geographic regions throughout the state. Laclede Gas Company is estimated to have the highest costs of any Missouri gas company with an average price tag for the winter at $933. AmerenUE customers can expect to pay the lowest cost for natural gas, according to the Missouri Public Service Commission, estimated at $746 for the winter.

The company with the highest estimated increase from winter 2004-05 to 2005-06 is Atmos. With an estimated $810 for heating costs this winter, Atmos customers will pay a projected average of $304 more this winter than last. This also represents the highest estimated percentage increase of any company at 60 percent. The lowest estimated increase in both dollars and percent increase was also AmerenUE, with a $160 increase and a projected 27 percent increase from 2004-05 to 2005-06 winter.

 
Source: The Missouri Public Service Commission

 

Factors Affecting Your Gas Bill
The actual wholesale cost of natural gas represents approximately 65 percent of the customer's total monthly bill. The other 35 percent represents the cost for delivery of the natural gas to the customer's home or business (the pipes in the ground and the operations of the company to deliver gas).

There are a number of factors that might affect your monthly gas bill. Among these are weather, price adjustments, inventories, exploration and production.

Weather
A colder than normal winter will result in increased demand, which typically drives up the cost of natural gas. In addition, cold weather means your furnace is on more, making sure the home is heated. Cost and usage will determine what the monthly bill will be. While a colder than normal winter will likely increase your natural gas bill, a warmer than normal winter will likely reduce both the price of natural gas and consumption, which will reduce your natural gas bill.

Price Adjustments
Natural gas prices are determined in an open, competition-based market. The price is primarily driven by supply and demand. If the demand is high and the supply is low, the price for that commodity will be high. The price your natural gas company must pay to wholesale suppliers for natural gas to serve its customers is not controlled by the Missouri Public Service Commission (PSC). The Missouri PSC does, however, conduct audits of the purchasing practices of the natural gas companies to assure that they were prudent.

Inventories, Exploration and Production
Winter residential heating creates a demand that production alone can't serve. Utilities stockpile additional natural gas supplies during the summer when demand is lower to help meet increased winter usage. Higher demand for natural gas in the summer to run new electric generating plants impacts supply, price and storage. When winters are mild and prices are low, production companies tend to curtail development of new natural gas supplies.

Experts say there is a 6 to 18 month lag between the time of initial drilling and when additional production enters the market. Swings in market demand and/or supply can happen faster than exploration and production can respond. This results in an overabundance of natural gas at some times and scarcity of supplies at other times, which contributes to price swings in the natural gas market.

Steps to Reduce Gas Prices
There are ways to limit your costs at the meter that can save the household money. Though the savings won't be drastic, these few tips could reduce winter heating costs by 10-25 percent.

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