PSE likely to request increased gas rates

seattletimes.nwsource.com By Alwyn Scott Seattle Times business reporter

Puget Sound Energy said it is likely to seek an increase in natural-gas rates, perhaps as early as this week, in response to surging prices caused in part by the dry Northwest winter and the arctic blast that swept the East Coast.

The utility, which serves 622,000 natural-gas customers around Puget Sound, said it probably would seek a purchase gas adjustment (PGA) from the state Utilities and Transportation Commission to pass through gas costs that have been creeping higher for months and shot up yesterday.

"We're running the numbers and working on a filing, but the filing is not yet complete," said Grant Ringel, a PSE spokesman. "It could be soon as this week."

He said it was too early to say how big the increase would be. The average residential customer now pays $53 a month, PSE said.

The news comes as wholesale natural gas spiked 38 percent yesterday on the New York Mercantile Exchange, a huge $2.53 jump, to $9.137 per million British thermal units. That compares with typical 10 or 20 cent moves.

The surge was mainly the result of below-average temperatures in Eastern and Central states, which have drained stocks of natural gas and made traders nervous about shortages.

"There's been a lot coming out of storage for weeks now," said Jason Mihos, who writes for California Energy Markets, an industry publication. "The storm that hit the East Coast really walloped prices."

But there's also a long-term trend at work. Natural-gas prices have more than doubled over the past year, said Julie Ryan, vice president of PSE's energy portfolio. That's having an effect on many other energy prices and has raised concern that prices could stay high for months.

Wholesale electricity soared 44 percent to $74.63 per megawatt-hour at Washington's Mid-Columbia trading point, according to Bloomberg News, a 19-month high. Some traders quoted prices as high as $80 in California.

A number of factors are to blame. Natural-gas production has been about 5 percent below normal over the past 12 to 16 months, she said, meaning there was less supply on hand. Cold winter weather in much of the country has increased demand and drawn down inventories. At the same time, rainfall in the Northwest has been about 75 percent of normal, cutting the amount of hydro power available and increasing demand for electricity generated by natural-gas turbines. The prolonged strike in Venezuela has cut crude-oil supplies and, along with concern about a war with Iraq, has boosted prices, which affects the cost of home-heating oil.

PSE last raised rates during the 2000-2001 energy crisis. After natural-gas prices doubled in the summer of 2000 from the previous year, PSE got a PGA increase that lifted the typical bill about $13 to $63 a month.

Another increase took it to a peak of $80 a month in January 2001. By September, a PGA cut the average bill to $70 a month, and last year, three decreases brought the average down to $53.

Alwyn Scott 206-464-3329 or ascott@seattletimes.com