On Congress's front burner: easing natural gas prices
Washington — Although cherry blossoms are still in bloom around Washington, Congress is already looking ahead to next winter. The Senate Energy Committee is slated to start drafting a bill this week to curb natural gas prices, with the House Energy Committee expected to follow by late April or early May.
Last year voters who heat their homes with gas were angered by gas prices, which rose 20 percent at the retail level even though demand for gas was down and supplies were abundant.
And homeowners did not feel the full impact of the price increase in their heating bills last winter, since residential gas consumption was cut by unseasonably mild weather.
Both members of Congress and the Reagan adminstration are eager to act before a more normal winter sends gas bills soaring even higher, antagonizing voters before the 1984 elections. ''People do not look at the average price of gas, they look at their bill,'' warns Energy Secretary Donald P. Hodel.
''Something has to be done before the next heating season and something has to be done before the next election,'' adds a Senate Energy Committee staff member.
The push for congressional action comes as some forecasters say overall gas price increases may be flattening out, and as gas pipelines seem to be taking stronger steps to control the cost of gas they move. Pipelines ship gas from production sites to local distribution companies. Then distribution companies channel gas to individual homes or businesses.
Even without congressional action, the price that pipelines charge local distribution companies for gas a year from now ''will be about the same'' as it is today, predicts Foster Corwith, an industry analyst with Dean Witter Reynolds Inc., the brokerage firm.
That assessment is echoed by Morris Greenberg, an economist with Chase Econometrics, a forecasting firm. ''We have gas prices remaining flat from late 1982 or even declining slightly'' in 1983, he says.
Some homeowners, however, could still find gas prices rising between 5 and 10 percent, Mr. Corwith says. That is because some distribution companies may raise prices to homes so they can offer lower prices to industrial customers to keep them from switching to lower-cost competing fuels.
A number of factors will contribute to more stable overall gas prices, Mr. Greenberg asserts. Some pipelines have contracts with gas producers tied to the cost of fuel oil, which has been declining. In addition, some pipelines have contracts with gas producers that contain a ''market out'' clause, allowing the pipeline to change contract terms if the market for the gas drops sharply.
At the same time, more pipelines are seeking to renegotiate contracts that do not include market-out provisions. Often the contracts were entered into as pipelines scrambled to arrange supplies after gas shortages developed in the winter of 1976-77.
Take-or-pay provisions in the contracts can require pipelines to buy gas whether or not they can resell it. As a result, companies sometimes purchased high-priced gas when cheaper supplies were available.
''A good bit (of renegotiation) is going on between pipelines and their suppliers,'' says Jerome J. McGrath, president of the Interstate Natural Gas Association of America, which represents pipelines. ''The negotiations have been directed more toward the take-or-pay issue than toward price.''
And one gas pipeline company last week went beyond negotiations. Columbia Gas Transmission Corporation said it was exercising the legal concept of force majeure to escape purchase obligations to buy gas it could not sell. Force majeure excuses a contractor because of forces beyond his control.
The major legislative proposals on natural gas would offer pipelines the ability to reduce the take-or-pay provisions in existing contracts. The Reagan administration bill would allow pipelines to take or pay for only 70 percent of the gas they have under contract.
A major alternative plan, the Natural Gas Consumer Relief Act, was proposed by House and Senate members from states that suffered large gas price hikes, and it would go further than the administration on several issues. On take-or-pay it would allow pipelines to buy only 50 percent of the gas their contracts require them to buy.
Perhaps the sharpest disagreements in the gas debate are on price control. The administration would decontrol the price of old gas - fuel tapped before 1978 - while the Natural Gas Consumer Relief Act would not.
Meanwhile, the Consumer Relief Act would roll back gas price ceilings to the levels set for January 1982 under existing law and extend the phase-out on controls. By contrast, the administration would not roll back prices, and it favors a price ceiling based on the lower level of limits in existing law or the average of all deregulated prices.
Finding a package that can satisfy all factions in the debate will be difficult. But both legislators and the gas industry are feeling pressure from consumers.