Wednesday, September 13, 2000

Natural gas prices addressed

Public hearing scheduled in Covington

By Charles Wolfe
The Associated Press

        FRANKFORT — The state commission that regulates utilities opened an investigation Tuesday into recent, dramatic increases in natural gas prices.

        The inquiry is to include five public hearings, including a public hearing scheduled for Oct. 10 in Covington. A commissioner described it as a “fact-finding” exercise. There was no implication of a gas utility being under suspicion.

        The state Public Service Commission was warning as long ago as mid-July that 750,000 natural gas customers in Kentucky should brace for significantly higher bills, especially for heating.

        Increases could be as much as 50 percent by some estimates. The PSC has projected likely increases of 20 percent to 30 percent.

        “They'll really notice that increase ... in the winter months,” Ed Holmes, vice chairman of the three-person commission, said in a telephone interview. “It's a way of preparing customers for the increases we've already seen” in rates being filed by utilities.

        The commission has limited authority in the matter. Wholesale natural gas price increases are regulated only by the market place, not by the PSC.

        Utilities are to profit from delivery of gas, not from its sale. Increases in wholesale gas prices are to be passed along to consumers, dollar for dollar. The PSC's job is to ensure no profit taking occurs.

        Mr. Holmes said recent natural-gas price increases have been classic supply and demand. A series of mild winters caused demand for natural gas to slacken. That depressed prices, and drilling declined.

        Now, however, hot summer temperatures have driven up demand for electricity, especially for air conditioning. Electric utilities needing power have turned increasingly to small, supplemental “merchant plants” that burn natural gas.

        “Gas has been a fuel of choice here lately,” Mr. Holmes said.

        Merchant plants are not regulated because they are operated with investor money and compete in the open market, he said.

        The commission's hearings are planned in Lexington, London, Covington, Louisville and Owensboro. The sites are home to the state's five largest natural gas distribution companies — Columbia Gas of Kentucky; Delta Natural Gas Co.; Union Light, and Power Co.; Louisville Gas & Electric Co.; and Western Kentucky Gas Co.


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