Winter bears down on electric and gas consumers
As I write this, a winter storm named “Leon” is delivering freezing rain, sleet, snow and frigid temperatures to most of Louisiana south of Shreveport. Leon caused the closure of stategovernment offices in 56 of 64 parishes, road hazards across the region and the mobilization of electric companies to combat service outages caused by frozen tree limbs falling on power lines.
Not everyone was grim about the weather. The bulletin of one Louisiana energy trade association carried the following message to its members: “Here’s to a cold, cold winter!” Cold winters traditionally boost demand for natural gas, propane and home heating oil and resulting increases in the prices of these fuels. The hard winter of 2013-14 is no exception.
Whether you call it a “polar vortex,” “Arctic chill,” “Leon” or just winter, this cold season is chilling bones nationwide and rattling consumers with higher-than-normal energy bills.
Even before winter’s bitter cold, the U.S. Department of Energy’s Energy Information Administration was predicting higher heating bills for 90 percent of the nation’s 116 million homes. EIA projected increases of 2 percent for homes heated with electricity, 9 percent for propanefueled homes and 13 percent for those heated with natural gas.
Those estimates were issued in October, before the nation saw winter temperatures reach lower than they’ve been in 20 years, boosting demand for heating fuels and emptying stockpiles of natural gas.
Since the shale-gas revolution, supplies of natural gas have been so plentiful that prices have been stable in the $3 range for a million British thermal units. But in recent weeks the price has soared above $5 per million BTU for the first time since 2010.
Investors seem to believe gas prices will continue to rise, judging by bullish bets placed on gas futures. But one expert quoted by The Wall Street Journal said he’s seeing exploration and production companies trying to lock in $5 prices, an indication that they don’t believe these high prices will last.
If so, that’s good for electricity and natural-gas consumers. Like most electric utilities across the country, Louisiana power companies add a line-item charge to our bills for the price of fuel used to generate electricity. This fuel charge reflects the actual price of the fuel used to make each consumer’s power, dollar for dollar.
The Energy Information Administration said Louisiana power companies employ the following mix of fuels for electricity generation: 57 percent natural gas, 22 percent nuclear, 17 percent coal and 4 percent renewables. Owing in part to our abundance of natural gas, EIA said Louisiana electric rates are among the lowest in the United States.
Will rising prices for natural gas raise our utility bills? That depends on the utility that provides your service, the amount of gas it consumes and whether it has long-term contracts at fixed rates. Utilities commonly “hedge” gas purchases in an attempt to minimize price shocks to customers. Thus the gas coming to us today from CenterPoint Energy Arkla may have been purchased 6 to 12 months ago and stored in a salt cavern until needed this winter.
SWEPCO’s fuel mix is 51 percent coal and lignite, 42 percent natural gas and 7 percent wind power. The company says its diverse fuel mix acts as a “natural hedge” against the risk that any one fuel will escalate in price.
The good news is that all fuel charges put to utility customers are audited regularly by the LPSC to ensure that consumers are paying the correct charge for the fuel used to make their electricity.
Here’s more good news for consumers battered by bitter cold temperatures and rising fuel prices: A 2007 LPSC rule that I passed prevents Louisiana electric and gas utilities from cutting off residential customers when temperatures reach freezing. That same rule applies in summer when the heat index hits 105 degrees.
The rule simply allows consumers a little extra time to catch up on their utility payments once extreme temperatures pass.
LEGISLATIVE BULLETIN: The Legislature convenes March 10. One prefiled bill seeks to move a railroad safety program out of the Louisiana PSC and over to the state Department of Transportation and Development. DOTD has traditionally been friendly to the railroad industry in Louisiana, and you can bet the railroads are behind this bill.
Louisiana has consistently been at or near the top of national rankings for deaths and injuries occurring to motorists at railroad crossings. In response the LPSC proposed a railroad-safety program to work jointly with the Federal Railroad Administration and supplement federal inspectors working in Louisiana to combat rail-motorist collisions.
If you want Louisiana to improve safety at rail crossings, ask your legislators to vote “no” on Senate Bill 8 by Martiny.
Foster Campbell is the North Louisiana representative on the Louisiana Public Service Commission. You can reach him at 676-7464 or foster. campbell@la.gov.
