Heating bills on fire - Price hikes for natural gas coming on April 1

www.canoe.ca Thursday, February 27, 2003 By MARYANNA LEWYCKYJ, TORONTO SUN

Despite the recent deep freeze, the most wicked days of winter may lay ahead for homeowners using natural gas. That's because homeowners who deal with regulated utilities such as Enbridge and Union Gas are now paying artificially low prices for their fuel. But experts warn that it's only a matter of time before homeowners get whacked with huge increases to cover fuel that has been sold below its actual cost. Scotiabank reported yesterday that the commodity price for natural gas has quadrupled since this time last year and is approaching all-time highs set in During the winter of 2000-2001, Enbridge hiked rates twice -- by a whopping 45% on Oct. 1 and another 17% on Jan. 1. Regulated utilities estimate the cost of fuel when setting prices. If there's a shortfall between the estimate and the actual price, utilities can recover the difference. "Utility rates are very low right now," says John Kiemele, an analyst with En-Pro International Inc. He says customers at Enbridge and Union are paying about 21 cents per cubic metre, while today's spot prices are closer to 40 cents per cubic metre. "There's added costs for the consumer coming," says Kiemele. "They shouldn't look at their gas bill this past winter and assume that's all there is to come." Lisa McCarney, a spokesman for Enbridge Gas Distribution, said the utility reviews its rates every three months. Enbridge does not make a profit on gas supply charges. "At this point, we have not done the final analysis, but we would anticipate an increase in the gas supply price," said McCarney. The gas supply charge, which accounts for 54% of a total bill, could rise by 25%. The hike would take effect April 1. Customers with fixed-rate contracts with gas marketers such as Direct Energy would not be affected. The gas supply charge rose to 21.254 cents per cubic metre on Jan. 1, up from 19.095 cents. Natural gas prices were pulled up prior to winter as war worries and a strike in Venezuela caused crude oil prices to rise. A prolonged cold snap has sucked inventories 40% below last year, causing natural gas prices to hit a two-year high this week. "While the current 'war premium' in oil prices will likely fade over the next six to 12 months, a fundamentally tight North American supply-demand picture is expected to keep natural gas prices strong for some time," says Patricia Mohr, a Scotia Economics commodities specialist. Ironically, if Toronto is hit with an early heat wave this summer, homeowners will continue to suffer from high bills since natural gas is used to fire electricity plants.