Consumer Advocate Suggests Preparation

George Hohmann
Daily Mail business editor

Wednesday May 16, 2001; 01:00 PM

Higher natural gas prices seem inevitable next winter, so wise consumers should start thinking now about installing insulation and caulking around windows and doors, the state's consumer advocate said.

Billy Jack Gregg, director of the Consumer Protection Division of the state Public Service Commission, pointed out that Allegheny Power, the new owner of Mountaineer Gas, has asked for a 39 percent rate hike to be effective Nov. 1 while Dominion Hope has asked for a 53 percent increase to be effective Jan. 1.

If the companies get all they're asking for, an Allegheny Power natural gas customer who paid $84 last winter during a month when 13,000 cubic feet of natural gas was used would pay $121 and a Dominion Hope customer who paid $99 would pay about $150.

"We're fighting all we can to get this as low as possible," Gregg said. "But it still seems likely there will be some increase because of the increase in the underlying cost of natural gas."

Allegheny Power and Dominion Hope natural gas customers were insulated from price increases last winter because both had signed three-year price cap agreements with the state Public Service Commission. Those agreements end next winter.

Gregg said the price caps saved Allegheny Power and Dominion Hope customers a total of $90 million last winter.

"The price caps we had in place the last three years gave people in West Virginia an extra year to get ready for higher gas prices but, unfortunately, it looks like they're coming," Gregg said. "So, anything people can do now during the warmer season to add insulation to homes -- tighten up windows and doors -- is going to pay back in the heating season this year and for years to come."

Gregg said that when the Public Service Commission entered into the price cap agreements with the natural gas utilities, "the price of natural gas at the wellhead was about $2.70 per thousand cubic feet." The price peaked in January at around $10.

"Today, the price is closer to $4.50 per thousand cubic feet," Gregg said. "We had hoped that after the heating season, it would come down more, but the $4.50 level seems to be where the price of gas has settled, not only on the current spot market but also on the futures market for the next couple of years."

When Allegheny Power acquired Mountaineer Gas last year, it obtained a utility that serves 200,000 natural gas customers in 47 counties, making it the largest natural gas distribution company in West Virginia. Dominion Hope serves 114,000 customers in 32 West Virginia counties.

The hearing on Allegheny Power's rate hike request starts July 24 in Charleston. Gregg expects additional hearings to be held at other locations around the state. The hearing on Dominion Hope's rate hike request is Oct. 2.

Gregg emphasized that consumers need to begin preparing now for the proposed increases.

"Just like anything else, it is better to plan ahead," Gregg said. "A lot of times people go to the hardware store or Lowe's to do weekend projects. They should keep in mind as they see that tube of caulk, it might not be a bad idea to seal up cracks around the windows and doors.

"The first thing people should do is make sure they have adequate insulation in their ceilings. The second thing is to check their windows and doors. If you just cut down your usage by 10 percent, you would be saving a substantial amount. Assume it is $15 a month you're saving. It doesn't take too long for that to add up."

Possible projects range from a small outlay for a water heater insulation jacket to a big outlay like a new furnace or new windows.

"Obviously, newer furnaces are a lot more efficient than older furnaces," Gregg said. "That's a major capital investment. If you're going to replace a furnace, it's probably going to be cost effective to go for a higher efficiency model. It will cost you more at the time of purchase but you will save money through the life of the furnace because you'll be using less gas.

"Replacing windows is, once again, a major capital outlay. Especially if you're doing a large number of windows. But you have to look at how much you're likely to save in heating costs. Windows and doors are a major source of heat loss in any house."

Dan Genest, spokesperson for Dominion, said, "Our company believes it is good business to conserve energy and any steps our customers can take to improve their insulation or reduce their energy use is good for everybody."

Gregg said, "I recommend that anybody who thinks they might have trouble paying high gas prices this winter get on the budget payment plan this summer." The open season for signing up for budget payment plans is usually late July and August. "People should be aware of that."

A budget payment plan "makes your gas bill much more predictable," he said. "Your payments should be about the same, month-to-month."

Gregg said utilities base the budget payment on the rate at the time and the customer's historic usage of fuel. "Whatever the new rates are that are approved by the commission, there will be an adjustment for that month after the commission issues an order," Gregg said.

"After the adjustment, the bill should stay the same for the rest of the budget period, with one adjustment -- a credit or a catch-up bill, depending on whether you overpaid or underpaid -- at the anniversary," Gregg said.

"A customer can pretty well gauge by the end of the winter whether there's going to be a balance left, because gas usage pretty much stops after April," Gregg said. "At that point, you still have three or four months left to pay. You know how much you're paying per month and you know how much your ongoing bill is. If it appears there's going to be a substantial balance left, you might want to start paying a little extra each month, just so you don't have a big surprise in August."

Gregg said the talk of conservation is "almost like 'Back to the Future' -- it was a big selling point in lots of products in the early 1980s. It seems that during the last 10 to 15 years, as low energy prices have become the norm, it is no longer a big selling point. I would expect that to change.

"Ultimately, for all consumers, if we cut back and conserve and make demand not rise as quickly as expected, that's good for the long-term price outlook," Gregg said.

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