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Document 84 of 370.

August 7, 2000, Monday

SECTION: NEWS;Pg. A-1

LENGTH: 698 words

HEADLINE: Natural gas prices also rising with temperature

BYLINE: Tony Fong; STAFF WRITER

BODY:
For businesses such as Michael Renihan's, the summer season is usually slow. With the warm weather, demand for natural gas should be low and so should prices.

But in the past three months, Renihan, owner of Madison Coin Laundry in Normal Heights, has seen his natural gas bill jump by about 70 percent, leaving him to fish for ways to save costs.

"I can't raise my prices every month," Renihan said. Skyrocketing costs for electricity have gotten most of the attention, but at a time when natural gas prices should be at their lowest of the year, they have risen almost as quickly as power rates.

The reason for the spike is a complex calculus of weather patterns, market forces and power demand.

The gas bill consists of two parts -- the portion that San Diego Gas & Electric charges for delivery and the portion based on the price of natural gas on the market. The commodity component is the main reason for rising gas prices.

During the past year, SDG&E officials said, its delivery component has gone down, but the commodity component has increased from 24 cents per therm in July 1999 to 48 cents per therm last month. A therm represents 100,000 British thermal units, the standard measurement for natural gas.

On a typical residential bill, this translates to an increase from about $15.16 for natural gas in July 1999 to about $20.11 last month, said Art Larson, a spokesman for Sempra Energy, the parent company of SDG&E.

Throughout this spring and summer, the Henry Hub index price, a barometer in the industry, has hovered at the $4 mark per million British thermal units. This is the highest level since markets became deregulated in the 1980s.

Until a few years ago, the price of natural gas ran relatively low -- but, beginning in late 1997, companies slowed down their drilling, reducing the supply and tilting the market in their favor, said Edward Kelly, director of research for North American gas at Cambridge Energy Research Associates.

While that brought prices up, most Americans didn't notice because of several warm winters that kept natural-gas use in check, Kelly said. A cold snap last winter ate into the lowered supplies, however, and this past spring industry analysts began forecasting a shortage in supplies for the upcoming winter.

The summer is typically a time for natural-gas suppliers to stock up for the winter months but, according to a weekly report from the American Gas Association, the nationwide amount of natural gas reserved for the winter is less than two-thirds of what will be needed by Nov. 1 and 17 percent less than a year ago.

"If you want to put gas in storage, storage competes with in-use now," Kelly said. "There's no surplus of production, so the need to store gas now for the coming winter competes directly with current in-use and drives up current prices."

Thus the increase in the commodity component of the gas bill.

With temperatures soaring throughout California recently, utilities have been forced to tap into their gas supplies to generate electricity to meet demand.

Last week SDG&E asked permission from the California Public Utilities Commission to put its power plants on "interruptible tariff," allowing the use of alternative fuels to generate power when the demand outstrips supply, said Gary Cotton, senior vice president of fuel and power supply for SDG&E.

Natural gas provides 31 percent of the electricity used in the state, according to the California Energy Commission.

In San Diego County, though, supply is limited because San Diego Gas & Electric has only one pipeline to feed the demand for gas, adding to costs, said Michael Shames, executive director of the Utility Consumers' Action Network.

For consumers such as Renihan, the price increases translate to some creative approaches to cutting down on use, including possibly trimming the running time on driers. Renihan has raised his prices on washing machine use by 25 cents.

As temperatures cool in the coming months and home heating drives up demand, he worries about what it will mean to his wallet.

"This fall, they're going to raise the prices," he said, "and it's going to be astronomical."

GRAPHIC: 1 PIC | 1 GRAPH; 1,2. SOURCE: Sempra Energy | UNION-TRIBUNE; 1,2. Power usage -- A week's worth of peak power consumption for San Diego and southern Orange counties. (A-13)

LOAD-DATE: August 9, 2000

Document 84 of 370.


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