Utility consumers face soaring costs

LEBANON, Jun 21, 2008 (The Lebanon Reporter - McClatchy-Tribune Information Services via COMTEX) -- VVC | Quote | Chart | News | PowerRating -- For many consumers, the challenge of juggling rising food prices, utility bills and the punishing price of petroleum may be only a prelude to staying warm this winter.

Vectren Corp., Evansville, warned recently that its nearly 1 million customers in Indiana and Ohio could pay "much higher prices than last winter."

The cost of energy is surging at an "unbelievable, unbelievable" rate, Lebanon Utilities General Manager Mike Martin said recently.

How unbelievable?

Less than two weeks ago, Martin told the Lebanon Board of Works it was costing $99.50 a ton for coal to power electric generating plants.

On June 13, that same coal was selling for $117.60 a ton.

Lebanon and 50 other Indiana utilities buy power from the Indiana Municipal Power Association. Ninety percent of that electricity comes from coal-fired plants.

Last year, IMPA paid $45 a ton for the low-sulpher central Appalachia coal used in the eight generating plants it owns or co-owns.

The concern is clear: Consumers will pay more to stay warm this winter. Electric and natural gas providers are warning their customers to expect bigger bills, and to budget accordingly.

Both utilities allow customers to pay a flat fee, based on estimated use. In Lebanon, the balance bills have been due in June. Consumers either pay the balance, or are given a credit that carries over to the next month.

"We're redoing budgets right now," said Laurie Gross, consumer relations manager for Lebanon Utilities.

"The best scenario for a budget is to break even by the reconciliation month," Gross said. "But a budget is just a best guess."

For two years, Gross said bills have been reviewed in June and in December, "just to keep people from ending $800 in the hole."

This December, Gross said, "is going to be an interesting month."

Only 6 percent of Indiana consumers use fuel oil for heating, according to the Indiana Petroleum Marketers & Convenience Store Association. About 3 percent is used for residential heating.

The Energy Information Administration has estimated heating oil will cost $4.46 a gallon this winter, up from $1.19 a gallon last year.

Natural gas, which is used to heat homes and to power electricity-generating plants, has increased 45 percent from last year.

In the last winter heating season, natural gas averaged about $8 per thousand cubic feet (also called a dekatherm), Vectren said in a press release. The New York Mercantile Exchange estimates the cost will be more than $12 per dekatherm this winter.

Americans will burn about 2.2 percent more natural gas, for residential and commercial use, this year, the federal Energy Information Administration estimated in a June 10 short-term energy outlook.

Although U.S. suppliers are expected to pump 6 percent more natural gas in 2008 than last year, there will be about 240 billion cubic feet less of liquefied natural gas this year than in 2007.

Hurricanes in the Gulf of Mexico could shut off 11 million barrels of crude oil and 78 Bcf of natural gas this year, the National Oceanic and Atmosphere Administration estimated.

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