Gas prices: The heat's on 

Americans can wax nostalgic about the occasional energy crisis --- What did you do in the Embargo, Daddy? --- but frequent repeats get old fast. California knows this all too well, of course. But other states are getting in line.

            One big hint of this came recently: The price of natural gas in spot and futures markets shot up dramatically between Thanksgiving and mid-December. Federal officials said this couldn't be traced to supply problems alone. Analysts and consumers wondered about "market manipulation" and other skullduggery. A Congressional investigation may follow.

            The New York State Public Service Commission (PSC) reacted to the situation November 17. PSC chair William Flynn asked the New York Mercantile Exchange to investigate. He warned the price increases would cause "inevitable economic repercussions."

            A PSC memo notes that on November 24, natural gas futures prices were 15 percent lower than last winter. But by mid-December, said the memo, prices had jumped by around 45 percent over what had been expected for winter 2003-2004.

What will all this do, here and elsewhere? Hard to know precisely. "It is especially difficult to project future natural gas prices due to uncertainties and rapid changes in natural gas markets," says a recent PSC report. (The report adds that "no industry analysts" foresaw that gas prices would rise dramatically in winter 2000-2001 --- or that gas prices would fall considerably before the following winter.)

            But all market-oriented things considered, it's fair to assume your natural gas bills will be going up.

            Don't get too worried about supplies, at least. On November 24, the New York State Energy Research and Development Authority released its annual "Winter Fuels Outlook." The report notes that "natural gas stocks [nationwide] have rebounded and are 3.9 percent above the five-year average." Gas utilities in New York State, says the report, "have contracted for adequate supplies to meet winter conditions."

            There's a caveat: "Heavy reliance on natural gas and petroleum fuels for electricity generation has the potential to place unexpected and added demand on these heating fuels, particularly during extended cold snaps..."

            Truth is, this state is especially vulnerable to price and supply swings involving natural gas. That, says the PSC, is because New York is the "fourth largest consuming state in the nation" after Texas, California, and Louisiana. And this dependency could increase if proposed gas-fired power plants are built to satisfy growing demand. (Of course, the scenario will be quite different if the state opts for renewable alternatives like wind and solar instead.)

            In any case, almost all of New York State's natural gas comes from elsewhere. According to the PSC, only two percent of the gas used here is produced within the state.

Rochesterians will likely feel a crunch, large or small. The utilities are certainly working toward that end.

            Back on May 16, Rochester Gas and Electric Corporation, now a subsidiary of Ithaca-based Energy East, filed for a rate increase with the PSC. The company asked for a 7.6 percent hike in its rate for natural gas and a 16.3 percent hike in the rate for electricity. If the PSC grants the request --- and such requests are often scaled down --- the new rates will apply for the 12 months ending April 30, 2005. The rate case is still pending. Recently, a deadline for certain kinds of relevant testimony was moved forward to mid-January. (RG&E spokesperson Dick Marion did not return calls for comment.)

            Rochesterians can find a silver lining in their electric rates, though. RG&E electric customers "are not as bad off as people downstate," says Gerald Norlander, head of the Albany-based Public Utility Law Project (PULP). "RG&E's done a pretty good job on the electric side until recently" he says, "because they had their own fleet of [generating] plants." He notes that for a time RG&E "resisted the deregulation model" and thus did its customers a favor.

            But especially since its merger with Energy East, RG&E has been actively promoting deregulation. Moreover, on November 25 the company signed an agreement to sell its largest generating facility --- the Ginna nuclear plant in Wayne County --- to Constellation Generation Group. Thus RG&E has slapped a few wild cards on the table, environmental as well as financial.

            Whatever is happening with electricity, things aren't peachy with natural gas.

            First the good news: A PULP backgrounder shows that over the past decade, RG&E gas customers have done better than some users to the south. According to the backgrounder, which uses PSC data, the "typical monthly residential gas bill" in RG&E territory in July 2002 was around $60; in January 2003 it was around $275. The typical Consolidated Edison customer also paid around $60 in July 2002; but the ConEd customer paid more than $300 the following January.

            But RG&E customers don't fare so well compared to those of New York State Electric and Gas --- even though the latter also is owned by Energy East. The PULP backgrounder shows that the typical NYSEG customer paid around $225 in January 2003, substantially less than what the RG&E customer paid.

The atypical customer, though, is the one to watch this winter.

            As natural gas prices rise, lower-income people across New York who depend on it for heat, cooking, and/or hot water could soon be taking a hit. That's because of possible shortfalls in federal funding for "LIHEAP," the Low Income Home Energy Assistance Program.

            It all has to do with the federal Omnibus Appropriations bill making its way through Congress. This measure funds all sorts of federal programs, including more than a few that are controversial. But many are vital, too --- like LIHEAP, a literal lifesaver for millions of people in the Northeast.

            Yet oddly and sadly, the bill would damage LIHEAP significantly.

            As a memo from the national Campaign for Home Energy Assistance points out, the bill would cut LIHEAP funding nationwide by more than 10 percent, even while demand for fuel goes up. New York State's LIHEAP funding would drop more than 14 percent --- a loss of more than $36 million.

            So what's the bill's status? On December 8, the House of Representatives passed it by a wide margin. Rochester-area Representatives Amo Houghton, Tom Reynolds, and Jim Walsh, all Republicans, voted in favor. Representative Louise Slaughter, a Democrat, voted no. Slaughter later said "some provisions in this bill were good, [but] many others will do lasting damage to our nation and its infrastructure." She deplored the LIHEAP cuts, among others.

            The Senate is due to take up the Omnibus bill in late January. If the Senate passes the same version as the House did, LIHEAP will be cut. In the meantime, funding for the program remains at this year's level.

            Slaughter and other Congressmembers recently petitioned Health and Human Services Secretary Tommy Thompson for an emergency LIHEAP infusion. "Many states are running out of funding," said Slaughter in a news release, adding that Thompson has around $1.8 billion in a reserve fund. On December 19, just in time for holidays, Thompson did release $598 million, says a Slaughter aide. New York will get $46 million.

            More than a lump of coal, but still not enough.