EKB News

Kentuckians will pay more for natural gas in the coming months than they did a year ago, the Kentucky Public Service Commission (PSC) says. “High heating costs will again be a burden for many of our citizens,” PSC Chairman David Armstrong said. “Although the prices have come down since August, natural gas still costs more than it did at this time last year.” On average, Kentucky customers can expect to pay about 17 percent more this year than last for the same quantity of natural gas. That is in line with national averages. Energy prices in general have been declining in recent months, and natural gas today is well below its peak price of this summer. But the summer prices will affect winter heating costs. A portion of the natural gas that will be used this winter was purchased and stored during the summer and its cost will reflect the higher price. “Fortunately, we are heading into the heating season with every indication that natural gas supplies will be sufficient to meet demand,” Armstrong said. “This would suggest that, unless there is widespread and extreme cold weather, prices should stay fairly stable.” Weather is always the main factor in determining the amount of energy that consumers use to heat their homes and thus the size of their heating bill, Armstrong said. Measures to improve energy efficiency and conservation are the best way to counteract the impact of high energy costs, he said. “Consumers are always wise to begin each winter with a plan for paying their heating bills, and should take steps to reduce those bills by conserving energy,” Armstrong said.
Wholesale costs, which account for the majority of natural gas bills during the heating season, have more than doubled since 2002, Armstrong said. Despite the recent declines, consumers should not count on further reductions, he said. “Nobody expects a return to cheap energy, and natural gas is no exception,” Armstrong said. By federal law, natural gas prices are not regulated at the wholesale level and fluctuate with supply and demand. Under Kentucky law, gas companies are entitled to recover the wholesale cost of the gas delivered to customers, including the fees they pay to interstate pipelines to transport the gas to their retail distribution systems. Companies are not allowed to earn a profit on their gas commodity costs. The companies’ gas cost adjustments are reviewed by the PSC to make sure they accurately reflect the wholesale cost of gas. About half of the natural gas used for winter heating is put into storage in the summer. In the past, this gas was less expensive and helped offset higher gas prices in the winter. Due in part to national demand for gas for electric generation, especially in the summer, that is no longer the case. Kentucky’s five major natural gas distribution companies expect their wholesale cost this November to be, on average, $11.70 per 1,000 cubic feet (mcf). That is up $2.24 (24 percent) from an average of $9.46 per mcf a year ago. But the November 2008 cost is well below the August 2008 average of $15.17 per mcf. The wholesale cost has declined $3.47, or 23 percent, in the last three months. In November 2002 the average wholesale cost was $4.90 per mcf. The wholesale cost of natural gas accounts for about three-fourths of a typical consumer’s winter bill. A typical Kentucky customer using 10 mcf next month will pay a total monthly bill of $150.78, up $22.38 – or 17.4 percent - from the $128.40 average bill a year ago. That increase is an average for Kentucky’s five major local natural gas distribution companies. The increase for any given customer depends on his or her gas company and individual usage patterns. The five major natural gas distribution companies in Kentucky are Atmos Energy, Columbia Gas of Kentucky Inc., Delta Natural Gas Co. Inc., Louisville Gas and Electric Co. and Duke Energy Kentucky Inc. Together, the five companies serve more than 750,000 customers in Kentucky and deliver about 176 billion cubic feet of gas annually. About 44 percent of Kentuckians heat their homes with natural gas. Those who heat with propane (10 percent) and fuel oil (3 percent) also will be paying more than a year ago. The 39 percent of Kentuckians who use electric heat are expected to see the smallest increase in their energy bills this winter. Regardless of the type of heat they use, many Kentuckians have difficulty paying their heating bills every winter, Armstrong said. Information on heating assistance is available from utility companies and local community action agencies, but funds are limited and sometimes run out during the heating season, he said. “Do not put off looking for assistance until your situation has become a crisis,” Armstrong said. “If you think you may need help paying your heating bill this winter, start looking for assistance now.’ A briefing held today on natural gas prices will be available for viewing at a later time in the PSC’s video library at http://psc.ky.gov/agencies/psc/webcast/AV_Index.htm. A video of the briefing also will be available for download on the PSC’s FTP site ftp://162.114.3.167/. The PSC is an independent agency attached for administrative purposes to the Energy and Environment Cabinet. It regulates more than 1,500 gas, water, sewer, electric and telecommunication utilities operating in Kentucky and has approximately 100 employees.