Double-digit increases possible for home heating fuel; Columbia gasoline among highest in U.S.

Natural gas costs expected to rise

SCE&G customers will not have to worry about running out of natural gas this winter.

But they may have to worry about how to pay for it, given price hikes after Hurricane Katrina and the potential impact on SCE&G rates.

And that’s on top of the company’s previously announced plans to raise its base rates.

“We do expect there to be an increase” in prices, said Dukes Scott, executive director of the S.C. Office of Regulatory Staff, a state agency that investigates utility issues.

It is too soon to know precisely how high fuel rates could rise, but if they were based on current wholesale rates, there would be double-digit increases.

Shortly after the hurricane, wholesale rates for natural gas were double what SCE&G’s residential prices are based on, Scott said.

The typical home now pays $121 per month for a winter supply of gas, but consumers would pay $164 per month at current wholesale rates and the profit margin stayed the same, said company spokesman Robin Montgomery .

But Scott said actual consumer prices probably won’t rise that high because:

• Consumers pay standardized rates set by the S.C. Public Service Commission, instead of paying the spiked, day-to-day prices for natural gas.

• The rates the PSC sets are based on the projected average gas price for the coming year, which tends to be less than the autumn-winter price.

The PSC is scheduled soon to make two decisions about SCE&G’s gas rates:

• On Sept. 19, the PSC will start hearings on a proposed increase to SCE&G’s base rates for gas.

The company in April asked the PSC for permission to raise consumer gas base rates by $7.50 a month, but in August it agreed with the Office of Regulatory Staff to seek a $4.50-a-month increase.

The PSC will make a final ruling on the request.

SCE&G has not determined yet how much it will ask to raise its overall rate, Montgomery said.

The company lost money on residential gas sales during 2004, but it earned a profit on sales to businesses and industry, Scott said. Combining all sales, SCE&G’s gas business had a 3.19 percent profit in 2004, a profit of $8.55 million on gas revenue of $401.45 million, he said.

• In October, SCE&G will ask the commission for an annual fuel-cost adjustment that will help the company cope with rising gas costs.

The company does not make additional profit on its fuel-cost adjustment rate increases. Those rates reflect what it pays to buy the gas its sells.

Wholesale gas costs have grown because Katrina shrunk the gas supply in the face of upcoming winter demand.

Hurricane damage along the gas-rich Gulf Coast initially restricted about 15 percent of America’s daily natural gas supply, Montgomery said. The gas supply has improved some since then, but SCE&G may have to wait until the end of this month for a full assessment of how the company will be affected.

Mike Wingo, who manages SCE&G’s gas supply, said this week that he does not think the company “will have a problem supplying gas” to residential customers and businesses that use natural gas as their only heat source.

But the utility may need to divert some gas to those homes and businesses from about 46 large industrial customers that use natural gas to run their equipment but can switch to other types of fuel.

SCE&G announced that intention last week but has slowed implementing it. Many manufacturers would have to switch to diesel, which is also facing supply trouble, said Martin Phalen, vice president for gas operations at SCE&G.

Because diesel prices are up, companies might have to raise prices for goods it sells, Phalen said.

Gas diverted from manufacturers to homes would supplement stockpiles of natural gas that SCE&G stored this summer.

Whether the stored gas will be enough to meet winter’s peak demands depends on how cold the winter will be and how fast Gulf Coast repairs progress, Montgomery said.

About a third of the gas SCE&G needs for the coldest days comes directly from wells and pipelines, many along the Gulf Coast, rather than from the corporate storage tanks.

Wingo said that if the winter is mild, slow repairs along the Gulf Coast might not hurt consumers as much. But if the winter is frigid, consumers might face the situation they did the winter of 2000-01. That’s when an unexpectedly cold November and December taxed fuel supplies and caused severe price spikes, Wingo said.

Reach McWilliams at (803) 771-8308 or jmcwilliams@thestate.com.