THE VIRGINIAN-PILOT
Copyright (c) 1997, Landmark Communications, Inc.
DATE: Saturday, February 15, 1997 TAG: 9702150248
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY AKWELI PARKER, STAFF WRITER
LENGTH: 61 lines
Geraldine R. Knight got an unsolicited economics lesson in December when she opened her bill from Virginia Natural Gas. By her count, it went up 25 percent since the previous December.
``It shocked my socks off,'' said Knight, who lives in Norfolk.
``To pay my fuel bill, I'll have to cut short somewhere else.''
She's not alone. Consumers are paying more this winter because the gas companies, including VNG and Commonwealth Gas in Hampton Roads, have paid more to suppliers.
But thanks to predicted milder weather through the rest of the season, consumers should soon see at least some drop in what they're paying, according to gas company representatives.
``We have received verbal approval from the (State Corporation Commission) to go ahead with a rate reduction for the March billing cycle,'' said Commonwealth Gas spokesman Mike Anderson.
The average residential Commonwealth Gas customer will see a 10 percent reduction in his or her bill, Anderson said.
Commonwealth's average residential bill, based on 7,000 cubic feet per customer, is $68.78.
VNG said its customers will see a 10 percent reduction in fuel costs beginning with their April bill, said VNG spokesman Ed Ware.
Normally, the SCC, which regulates public utilities in Virginia, reviews rate cases quarterly.
``Because the gas prices are so volatile, we've been reviewing it monthly,'' said Ken Schrad, a spokesman with the State Corporation Commission.
Customers alarmed by recent gas bills would be better to curse the weather and gas suppliers than their local utilities. By law, utilities aren't allowed to mark up the price of fuel.
All rate changes, whether they're intended to pay for capital costs or the cost of fuel, must be approved by the SCC.
``What it costs us to buy the gas, that's what the customers pay,'' Anderson said.
Local natural gas companies don't drill their own gas; they must buy it from producers in the form of long-term contracts and have it shipped to Virginia through a network of pipelines.
Those producers have boosted prices recently because their own supplies were diminished by the brutal winter of 1995-96.
On Nov. 1, 1995, natural gas traded at the Henry Hub market center in Louisiana for $1.83 a million British thermal units. One year later it cost $2.35 a million BTU.
In January the spot price hit a high of $4.60, but by Friday the price had sunk to $2.13 a million BTU.
Gas is a commodity just like wheat, oil or pork bellies. Its price can be influenced by the weather, supplies on hand or rumors of a dictator planning to invade an oil-producing country.
Local gas utilities buy most of their gas cheaply in the warmer months and stockpile it. But if those stores are used more rapidly than anticipated, gas companies must make their short-term fuel purchases on the spot through an exchange known - appropriately enough - as the spot market.
``It's like the difference between getting your milk from a grocery store or a convenience store,'' Anderson said. ``You're going to pay more for it at the convenience store.''