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Economy
Wednesday, 11-October-2006
By GARY HABER, The News Journal - Delawareans, heading into a winter in which temperatures are expected to be colder than last year, got some conflicting predictions from a government report issued Tuesday.

A U.S. Department of Energy forecast said natural gas prices nationwide will drop 13 percent this winter, more than twice as much as they will for Delaware customers of Delmarva Power, the state's largest natural gas supplier.

Natural gas users nationwide are in for about $119 in savings on their heating bills, while those who use heating oil can expect to pay 6 percent more -- an additional $91, according to the forecast.

The Energy Information Administration forecast that propane users' bills will be flat this winter, falling a scant 1 percent, or $15. Those who use electricity to heat their homes will see their bills rise about 5 percent, the group said.

In September, Delmarva Power, which has 120,000 natural gas customers in New Castle County, filed with the state Public Service Commission for an interim rate that would cut the natural gas portion of the typical customer's bill by 6.2 percent, or about $11.73 a month, to $177.89. The rate goes into effect Nov. 1.

At about the same time, Chesapeake Utilities Corp. filed for an interim decrease that would drop the amount its typical consumer pays by just $5, to $193 a month. The utility, which has 30,000 natural gas customers in Kent, Sussex and southern New Castle counties, had filed for an earlier 10 percent decrease in March.

The falling prices are good news for folks like Lindsay Bruce, 44, of Newark, who heats his home with natural gas. He said he'll "try to get the bill as low as possible, no matter what the charge is."

It's not such a welcome headline for oil heat users like Tim Mullins, of New Castle.

Mullins, 57, estimates his 175-gallon oil tank is about three-quarters empty, and he'll need to place an order for the winter heating season soon.

"I'm going to shop around, like I didn't do last year," says Mullins, who also plans on using his fireplace more than he did last year.

Natural gas supplies are at record levels and prices. After being high for most of the year, they hit a four-year low late last month.

Delmarva Power's new rate reflects the fact that the utility will pay 7.2 percent less for the upcoming year for natural gas. But, the utility will also hike by 1 percent the amount it charges customers to deliver the gas to their homes.

Delmarva Power and Chesapeake Utilities don't make a profit on what they charge for natural gas, passing their cost on to consumers without a markup.

"Our customers pay the wholesale price we pay," said Merrie Street, a Delmarva Power spokeswoman.

The two utility companies make their profits through charges for distribution and services, including billing and maintenance.

About 68 million Americans heat their homes with natural gas, according to the American Gas Association. About 150,000 of them live in Delaware.

Buying ahead of time

Natural gas prices dropped in the third quarter, hitting a four-year low in September, but Delmarva Power and other utilities can't wait that long to line up their supplies.

The Public Service Commission requires Delaware utilities to have at least 30 percent of their projected winter needs on hand six months before the start of the November-March heating season, Street said. Prices weren't as low as they are now when Delmarva Power was lining up much of its winter supplies, she said. The utility is making additional purchases now, while prices are low, she said.

Prices in the first quarter of 2006 were higher than in the comparable period last year. In the second quarter, they were about the same as last year, according to the American Gas Association, which represents the nation's natural gas utilities.

Natural gas suppliers have rebounded from 2005, when hurricanes Katrina and Rita damaged the Gulf Coast. The twin storms destroyed eight drilling rigs, damaged pipelines and natural gas processing plants, and cost the industry 800 billion cubic feet in lost production, according to the Natural Gas Supply Association.

This winter, supplies will be more plentiful, said Mark Stultz, a vice president at the association, which represents the nation's natural gas suppliers.

"We've restored significant production in the Gulf of Mexico that was lost last summer due to hurricanes Rita and Katrina," he said. "Most of the additional supply we're looking at this winter are due to having wells and platforms that were offline last winter in the Gulf of Mexico come back into service."

In August, there were 1,417 natural gas rigs active, up from 1,230 in August 2005, the group said.

It comes down to weather

Even with the drop-off in natural gas prices, weather remains the biggest factor influencing the size of heating bills this winter. Freezing temperatures will force customers to raise their thermostats, using more energy to stay warm and pushing up demand, which could squeeze prices higher.

The National Oceanic and Atmospheric Administration said Tuesday that while most of the nation will enjoy above-normal temperatures, they won't be as warm as last winter.

"December is really a wild card right now, but we have increased confidence that it will get warmer as the season goes along," said Michael Halpert, lead forecaster at the NOAA Climate Prediction Center.

Prepared for what comes to Del.

That mild winter outlook buoyed the spirits of Wanda Parker, a single mother who operates a day care center from a home near Dover that has an oil furnace.

"I haven't lived here very long, and the last house I had used natural gas," Parker said. "When I got here, one of my neighbors said that they paid $450 to fill his tank. I just about passed out. He said that was the first time that he had to pay that type of money."

But if you think forecasting energy prices is easy, just ask Jim Sellers, president of Hillside Oil Co. a Newark-based heating oil company.

When asked to predict the price of heating oil this winter, Sellers sounded a cautionary note.

"If I knew the answer to that question, I'd be retired on a beach somewhere," he said.
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