The Star-Ledger

Natural Gas Prices Lend N.J. Relief

Production, imports are increased as two utilities file for lower rates

The Star-Ledger — Saturday, June 2, 2007

Star-Ledger Staff

Finally, a little good news on energy costs.

While New Jersey households will soon see their monthly electric bills jump at least $10, and drivers are paying close to $3 a gallon at the pump, natural gas customers can expect to see their heating bills remain pretty much flat this coming winter.

Three of the state's four gas utilities filed their winter rate plans with the state Board of Public Utilities yesterday, and two of them are proposing a slight decrease in rates, while the third is asking for a modest increase. If approved by the BPU, the rates would take effect Oct. 1.

The state's biggest utility, Public Service Electric & Gas, proposed a 2 percent boost in residential gas bills, which would increase the typical customer's bill by $2.91 to $149.26 a month. The Newark company has 1.7 million gas customers.

The 476,000 customers of New Jersey Natural Gas would see their bills drop by 43 cents a month to an average of $150.65 if a series of rate requests are approved. South Jersey Gas customers would see their bills drop by $3 per month to $312 if their rate petitions win approval.

The only other gas utility in the state, Elizabethtown Gas, is seeking an extension on its filing, but is projecting a minimal change in rates, said Patrice Harris, a spokeswoman.

The filings came on the same day new rates for electricity took effect statewide, boosting monthly bills by up to 14 percent.

At a time when consumers are being socked with steadily rising energy bills, any drop or moderation in heating costs is welcome, consumer advocates said. Last year, gas rates fell a bit after reaching record highs in the wake of two devastating hurricanes in 2005.

"Any kind of decline is good news given the increases we've seen year after year," said Ev Liebman, program director for New Jersey Citizen Action. "On balance, it's still a pretty negative picture."

In New Jersey, utilities make no profit on the sale of natural gas, passing along their wholesale costs for the fuel to customers. Instead, utilities make their money on the delivery of the natural gas to homes and businesses.

About two-thirds of a typical natural gas bill is for the fuel, the other third being for delivery. The fuel charge is based on the amount of therms used, a unit the industry uses to convert the volume of gas used to its heat equivalent. A typical household uses between 100 therms and 200 therms each winter, depending on the size of the home.

Utility officials and industry experts said natural gas prices have stabilized during the past year because of increasing production, growth in imports of liquefied natural gas, and a recovery from the supply disruptions caused by Hurricanes Katrina and Rita in the late summer of 2005.

"Basically, the impact of the two big hurricanes in 2005 has evened out," said Roy Kass, an analyst at the Energy Information Administration in Washington, D.C.

In addition, the utilities have become more adept at hedging against huge price swings caused by supply disruptions.

"A lot of the energy providers have hedged by buying up supplies during times when prices are lower," said Kobi Platt, an industry economist with the federal agency.

At the same time, imports of LNG have grown 30 percent this year, and that growth is expected to continue next year, Platt said.

Utility executives agreed.

"We have been able to capitalize on opportunities by hedging effectively and using our storage effectively," said Sam Pignatelli, vice president of rates and regulatory affairs for South Jersey Gas.

Still, Frederick Lark, vice president of business analysis for PSE&G, said while the industry has recovered from the storms, "the market remains susceptible to additional run-ups in price due to hurricanes or colder weather."

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