Heating bills could go up because stored gas is sold off
MINNEAPOLIS — Minnesota consumers could see drastic spikes in their natural gas bills this winter, two energy companies said.
Xcel Energy and CenterPoint Energy both said the bills could be 30 percent to 50 percent higher than last year now that a glut of stored-up gas has been sold off.
Price increases are already being seen by those on budget plans that spread their costs over the year, because they essentially buy their natural gas in advance.
Gilbert Tornes of Minneapolis got a 75 percent increase in his natural gas bill from CenterPoint Energy. "I was expecting an increase, but I wasn’t expecting to get popped like this," said Tornes, who is retired and on a monthly budget plan.
"I don’t know what more I could do to conserve gas. We already turn the winter temperature down to 64 at night and have it set at 68 during day, or maybe 70 if we’re feeling a little bit cold."
However, some analysts said there’s a chance the slack economy and a decline in energy prices could combine to cut the price of natural gas to last year’s levels.
Natural gas prices have dropped recently after a 60 percent increase since the beginning of the year. The decline accelerated after Federal Reserve Chairman Ben Bernanke said last week that the economy was in worse shape than expected.
Natural gas prices would have to fall a long way to reach the same level as last winter.
The July futures contract price for natural gas to be delivered in January is slightly over $10.50 for a million BTU (British thermal units) of energy — about 46 percent higher than last January’s actual price. That’s a strong indication that consumers will see big price increases this winter, said Jeff LeMunyon, an energy consultant with Linwood Capital in Edina.
If natural gas prices decline significantly by early September, when natural gas prices get locked in for the winter, consumers might be saved from a price shock.
Several unknown factors could also affect futures prices for natural gas, such as a warm winter that reduces demand; a worsening economy in which industry burns less gas; or a natural disaster such as a hurricane in the Gulf of Mexico that disrupts natural gas production.
Also, there is less natural gas in storage than last year. That oversupply helped keep natural gas prices low last winter, but tighter supplies this year could tend to keep prices high.
Even so, analysts are leaning toward higher natural gas prices.
"A 50 percent increase in natural gas prices is absolutely possible," said Darin Newsom, an analyst for DTN, an Omaha firm that tracks the prices of commodities such as natural gas.
"If oil were to fall to $100 a barrel (from about $130 today), you could see natural gas fall to $7 to $9 in January," compared with $7.17 in January 2008, Newsom said. "But you’d need to see $100-a-barrel oil by September."