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Natural gas prices soaring

DARIN OLDE, Sierra Sun

To the confusion and dismay of many, the cost of natural gas in Truckee has doubled since local gas providers began monthly price adjustments last November.

In Truckee, the cost per therm – a measurable unit of gas – jumped from $.33 per therm in November to $.74 per therm in December. The price per therm nearly doubled again in January when the cost changed to $1.16 per therm, followed by yet another price increase this February to $1.21 per therm.

The average residential bill increased by 83 percent since November, but some residents say their increase has been even higher.

“Our December bill was $427. Our bill used to be in the $200 range,” said Ron Hemig, a Tahoe Donner resident.

According to gas officials, the price increases have been the result of a market tied directly to the power crisis in California. A report by the Sacramento Bee Sunday said 95 percent of power generating plants use natural gas for fuel, creating a dual utility dependence that has affected customers across the West.

The rising cost of natural gas caught many by surprise because the price local distributor Southwest Gas Corporation charged prior to last December could only change annually. The utility, seeing increased volatility in market prices, filed in November for a monthly purchased gas adjustment to pass price fluctuations on to the customer.

While gas officials say the price increases are dollar for dollar, the cost has angered residents and business owners who turned to natural gas with the hope of saving money.

People are conserving, but the price increases may scar agencies or businesses that aren’t able to pass on higher rates to their customers.

Tahoe-Truckee Unified School District, for example, saw an 80 percent increase in its natural gas bill for the December/January billing period. The district’s bill went from approximately $35,000 a month to $75,000, a huge increase for an already financially strapped school district.

Even with conservation efforts in place, said TTUSD Director of Risk Management and Maintenance Chris Cooper, with that high of a rate hike the district will still see a significant increase on its natural gas bill.

“Basically, you start to feel like you’re in a losing battle,” Cooper said. “If we don’t conserve further for the rest of the winter, we’re looking at something between a $200,000 and $300,000 increase in expenditures to the budget based on gas and electric prices.”

That increase would come directly out of the district’s reserve, a portion of money that makes up 4 percent of the overall budget and is set aside for unexpected costs.

“We’re trying to be as proactive as we can possibly be,” he said. “We have to survive this, we have no other choice.”

To help offset the increases, the district is taking a number of energy conservation steps.

School officials are also searching for federal or state relief for these unexpected increases.

With therm price increases five times higher now than this time last year, residents are wondering why the prices went through the roof, and when – if ever – they might go back down.

According to Southwest Gas spokesman Roger Buehrer, it has to do with how quickly the power and natural gas industry can evolve.

Natural gas was touted as the fuel of choice in the mid 1990s. Following production deregulation in 1985, there was an over-abundant supply, demand was relatively low and profits were shrinking. Wells became capped, Buehrer said.

With such low costs, electric generation plants began to use natural gas as fuel. Buehrer said virtually all new power plants beginning in the mid 1980s were using natural gas-fired plants.

Using one utility to generate another turned catastrophic last year when demand for power reached an all-time high.

“The prices just took off,” Buehrer said, referring to the economics of supply and demand. “For the first time there was this huge demand for natural gas to meet the demand for electric generation.”

The industry, he said, has not been able to catch up. Production companies have been able to inflate prices to match the demand in California.

Transmission and distribution companies such as Southwest Gas Corp., which is considered a local distribution company, are still regulated by the Federal Energy Regulation Commission. Their prices haven’t changed.

Truckee is lumped with Northern Nevada as one of five distribution centers under Southwest Gas Corp. The utility receives its gas from Canada and the Rocky Mountain basin which includes hundreds of small producers in Colorado, Wyoming and Montana.

Southwest Gas Corp. negotiates prices through marketers or transmission representatives. Buehrer said they don’t negotiate directly with producers.

“The power industry is really driving the market,” he said. “One power plant will use as much natural gas as all of the natural gas residential customers in Las Vegas.”

A typical power plant will use between 700,000 to 800,000 therms a day, he added, which is still more gas than the 6,500 to 7,000 Truckee customers use in an average month.

Buehrer said there are more wells in production now than during the last decade. Prices are beginning to decrease nationally and temperatures are increasing, but he does not know how that will affect bills locally.

If the power crisis in California remains unresolved, prices could take off again.

“We are in uncharted territory,” he said. “We have never seen gas prices like this.”

Sierra Sun reporter Abby Hutchison contributed to this story.


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