Why March heating bills will rise

www.suntimes.com February 27, 2003 BY TAMMY WILLIAMSON Business Reporter

When it comes to your gas bill, March isn't just going to come in like a lion. It's going to bite like one.

Fuel prices are rising amid a pending war against Iraq and striking oil workers in Venezuela. March is shaping up to be the most expensive heating month of all winter, based on local companies' regulatory filings.

That's unusual--typically, during a winter heating season, prices are highest in January and February, because it's coldest and demand is highest.

"There isn't just one thing that is driving" the increases, said Dave Wiers, an energy consultant with Sieben Energy Associates.

The nation's spot oil prices this week jumped to the highest point seen in years following a government prediction that the first two weeks of March are expected to be colder than normal, he said.

Here's how all of this will hit your pocketbook in March:

• Nicor Gas customers will pay about 64 cents per therm, the highest price for natural gas those customers have paid in two years. That's also a 16 percent increase over February.

• Peoples Gas customers will pay 55.49 cents per therm, a nearly 9 percent increase from this month and the highest per-therm rate since June 2000.

• Customers of North Shore Gas, a sister company to Peoples, will pay 56 cents per therm, an 11 percent increase from February.

Those prices are for the commodity and are passed along to customers without a markup, under Illinois law. The cost of distribution of gas is unchanged, and that is affected by how much gas is used.

Other factors are conspiring to drive up fuel prices.

This winter has been 29 percent colder than a year ago in the areas of the country that mainly use natural gas for heating--the Midwest, the Mid-Atlantic and the Northeast, according to the Natural Gas Supply Association, an industry trade group.

That has drawn down natural gas supplies more quickly than experts predicted at the beginning of winter.

A potential war with Iraq is driving oil prices, and natural gas prices tend to follow oil because sometimes natural gas is a replacement for some oil, Weirs said.

Peoples and Nicor do buy some gas in the summertime and draw down from storage as demand requires it. As supply dwindles, the utilities are faced with the cost of replacing the gas. And to a limited extent, gas companies buy gas supplies on the spot markets, too.

"It's safe to say, we're looking at higher gas prices for some time," said Nicor spokesman Don Ingle. "There's a lot of factors making us nervous."

Ingle said Nicor is encouraging customers to take advantage of its budget billing plan, which averages bills over 12 months. It also sets up payment plans for customers who have fallen behind on their bills, he said.