Jack Frost nips at America's heating bills

An early blast of arctic air is giving the US its first energy "sticker shock" of the winter.

Consumers, after enduring skyrocketing gasoline prices this past summer, will not be happy to see their utility bills this winter. Natural-gas prices have soared, which means that the cost of heating a home or running a business is going to be considerably higher - if today's prices hold up in the coming months.

On the West Coast, the "spot price" of electricity has practically jumped off the charts as some utilities have had to buy power to avoid blackouts.

The picture is not much better for those using home-heating oil, which is running 47 percent higher than last December.

The higher prices are coming about in part because Old Man Winter has arrived a little early. The Midwest is still trying to dig out from a blizzard that left Chicago's O'Hare Airport buried under more than a foot of snow. In California, authorities struggled to find enough electricity to prevent blackouts as a major cold front hit the West Coast. More bad weather is expected in the next couple of days.

If the weather remains harsh, some analysts are worried higher demand will cause prices to shoot up even further. "If we have a severe winter, we're in trouble," says David Wyss, an economist with Standard & Poor's-DRI in New York. "Our only hope is a mild winter."

There are also concerns that the industry has entered the winter with lower inventories than normal. In the case of natural gas, this is partly because demand remained high through the summer, when companies normally lay up supplies. Home-heating-oil stockpiles also are lower, in part because the high prices have caused suppliers to cut back on inventories.

Despite this, both the government and industry don't expect to see any shortages. Roy Kass, an energy analyst at the Energy Information Administration (EIA) says the natural-gas industry has changed the way it stores the fuel. It no longer puts the gas back into the ground in underground aquifers. It now uses underground, hollowed-out salt domes. This makes it much faster to inject gas when it's not needed and withdraw it when demand is high. "Now, we don't need the big inventory at the beginning of the year," says Mr. Kass.

Early this fall, officials were worried about home-heating-oil inventories. Since then, supplies have grown only slightly. "It's possible if the weather stays cold, storage could touch on some record low levels," says John Costello, an economist at the EIA.

But the industry expects it will get through the winter. "We could take a hit because of a heavy storm for a week or two and be all right," says John Huber of the Petroleum Marketers Association of America in Washington. But he adds, "if there are a lot of other events that take place, there are no guarantees."

Although supplies might be adequate, almost everyone expects heating and utility bills to rise. Earlier this year, EIA, part of the Department of Energy, estimated natural-gas bills would be 30 to 40 percent higher than last year. This week, it raised that estimate to 50 percent.

Of course, most consumers won't be paying these high spot prices for natural gas, since utilities usually buy the product in the summer, when it's less expensive. That's the case at KeySpan Corp., the largest distributor of natural gas in the Northeast.

Chuck Daverio, vice president of energy supply, says the company bought 30 percent of its winter needs this summer. "This will have a dampening effect on prices," says Mr. Daverio, who estimates KeySpan customers will pay 30 percent higher prices compared with last year.

But a 30 percent increase in heating costs is more than many low-income families can afford. To try to help this season, the government has increased the amount of money available under the Low Income Energy Assistance Program (LIHEAP). So far, LIHEAP has released $1.5 billion to the states. It still has $450 million in reserve, which can be used if prices remain high.

"We are tracking prices and waiting to hear from states and members of Congress," says Michael Kharfen, spokesman for the Department of Health and Human Services, which administers the program. But he adds, "we still can't reach every eligible household, because of the limits on funds."

With the price of gas and oil so high, some Americans are turning to wood. Prices for a cord of wood are up about 10 percent from last year.

At Paul's Fireplace Wood in Little Falls, Minn., business is up about 25 percent, says Paul Wilczek, the owner. "We've got more trucks delivering, and we're working longer hours," he says.

As the owner of Firewood.com, he is also shipping pallets of wood to California, Oregon, Texas, and the East Coast.

Steve Coates, owner of Greenridge Landscaping in Andover, Mass., has considered buying wood from Mr. Wilczek because his supplier in Vermont can't keep up with demand. Right now, he's taking orders for Jan 1. "We sell out as soon as we get wood," he says.

(c) Copyright 2000. The Christian Science Publishing Society