ENERGY: Natural gas costs could mean costly winter

Utilities stockpile gas during the summer to save, but prices have jumped.

By ZACH FOX - Staff Writer | Sunday, July 6, 2008 12:16 AM PDT ∞

Natural gas prices may leave Californians wishing for a mild Christmas.

Unusually high prices for natural gas are only slightly affecting consumers' energy bills through the summer months, as natural gas is typically only used during summer for stoves, water heaters and a minority of electricity production. But as winter approaches, consumers can expect the cost of heating a home to be higher than a year ago.

Because heavy natural gas use in the winter ---- especially in the Midwest and East ---- traditionally drives up prices, Californian utilities stock up on natural gas reserves during the summer, when prices tend to be cheaper.

Not this year.

Along with oil, natural gas prices have skyrocketed, more than doubling over the last year, according to quotes from the New York Mercantile Exchange.

"The higher prices are being passed onto consumers," said R. Skip Horvath, president of the Natural Gas Supply Association, based in Washington D.C. "The $13 gas (per trading unit) is going into storage, and when it comes out of storage, it will still cost $13 and that will be mixed into the bills."

As recently as February, natural gas was trading at $8 per 10,000 million British thermal units, the measure used to trade natural gas, which is not used to make gasoline.

Electricity bills are not reflecting the recent rise in natural gas prices, though San Diego Gas & Electric Co. does use natural gas to produce some of its electricity, said Denise King, spokeswoman for the utility.

SDG&E does, however, adjust its price to deliver natural gas each month as the cost to purchase the fuel fluctuates, she said, meaning customers will probably see higher winter gas bills if they use the same amount as last year.

"We're working hard to keep natural gas prices as low as possible," King said.

Horvath said the main culprit in natural gas prices is global demand, as emerging economies such as China and India carry rapidly growing energy needs.

Though natural gas and crude oil are harvested independently of each other and are used differently, the price of one can afflict the other, he said, because the underlying commodity for both is energy.

The natural gas association will release its projection of wintertime natural gas prices in October. As for predicting the cost of gas now, Horvath said it is too early because of variables, especially weather conditions.

Contact staff writer Zach Fox at (760) 740-5412 or zfox@nctimes.com.

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