Natural gas prices fall in February

This article submitted by Linda Stelling on 2/7/01.

Area residents received good news last week when natural gas rate went down 32 percent, from a record high of $1.27 per therm in January to 86 cents per therm (100 cubic feet). The lower prices were a relief to residents after gas bills almost doubled in January following a cold December.

An average natural gas bill for an average Minnesota home in January was $235, said Jim Bernstein, Minnesota Department of Commerce Commissioner. That same bill should drop to about $150 this month, he said.

"The reduction in wholesale natural gas prices for February can be attributed to a warmer than average January that reduced demand nationally; forecasted average temperatures for February; and a slowly improving storage situation," said Wayne Fransdal, director of supply management for Reliant Energy Minnegasco.

According to Joe Klenken, regulatory specialist with Reliant Energy Minnegasco, natural gas prices went from 50 cents per 100 cubic feet in January 2000 to 66 cents by June and up to 87 cents in December. In January of 2001, the price jumped another 40 cents to $1.27 per 100 cubic feet.

An average household typically pays around $600 annually for natural gas. The cost is expected to be over $1,000 for 2001, Klenken said.

Because of the above normal temperatures in January, the natural gas reserves were not utilized as much as in December. The past two winters were more than 16 percent warmer than normal. This year got off to a colder start.

Reliant Energy Minnegasco customers have two options for paying their bills. Cash customers pay monthly what they consume. Budget customers have their payments estimated and spread out equally over a 12-month period.

Both cash customers and budget customers were hit with higher bills because of the increase in prices and consumption.

Budget payments are calculated for customers based on their past natural gas consumption, normal weather conditions, and projected natural gas prices.

Bills for budget customers were refigured in January to take into consideration the higher price.

Eventually, the budget customers would have to pay more for the rising prices. Reliant Energy Minnegasco refigured their bills in January so customers wouldn't be hit by an oversized bill at the end of the year.

Propane prices
Propane prices are mirroring natural gas prices, but at a slower rate. The prices peaked in January and wholesalers are predicting there will be a slight drop in prices.

"As long as cold temperatures exist and there is a bullish market, the prices will remain high," said Paul Evans, Cenex manager.

Evans said thus far, the price hasdropped only a nickel, but he is anticipating a bigger drop in the future. "The weather is dictating the prices and we're not going to see a lot of changes," he added.

Prices went from 89 cents per gallon a year ago to $1.14 at the beginning of January. As of last week, cash propane prices were $1.28 for home fuel delivery. This week, cash prices are at $1.23 per gallon. The contracted price last October was 88 cents per gallon.

Evans has received the forecast for the October 2001 contracts and said they are looking more favorable. "By next October the contract prices should be below $1 a gallon," he said.

Homeowners who contracted and prepaid this year were rewarded, according to Evans. "It was a gamble and it paid off," he added.

According to Evans, propane was at a surplus level in February 1999 because of the mild winter. This resulted in crude oil prices dropping and companies discontinued making propane, a by-product of crude oil. Last summer because of the high price of gasoline, companies continued to make gasoline instead of switching to propane manufacturing. The result was a short supply going into this winter.

The propane supplies declined and prices skyrocketed because of the cold winter weather from Texas to Minnesota, creating a shortage.

Many businesses, including electric companies, have switched from higher priced fuel sources to propane to supply their plants, Evans added. This added to the demand, making the propane supply shorter yet.

Emergency funding
While Minnesotans struggled to pay their heating bills, the Minnesota House of Represen-tatives approved an early release of about $12.2 million in federal funds for emergency heating assistance for low-income residents.

Many Minnesotans were shocked by their last heating bill, and immediate assistance was needed, said Earl Wilson, Minnesota Department of Economic Security commissioner.

The federal funds had been frozen under a state law which provides the Legislature with a 20-day oversight window after the governor proposes federal fund expenditures by state agencies. The Legislature's actions released the funds to local community action programs which distributes the money.

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