DATELINE: 02 November 2004
Prepare for shock on electric bill
A rate increase is expected to take effect by year's end
By TOM FOWLER
Copyright 2004 Houston Chronicle
For Houston utility customers, the hits just keep on coming.
First it was Friday's news that natural gas bills will rise. Now it's electricity bills that are going to take a bigger bite out of your budget.
Reliant Energy, Houston's largest electricity provider, asked state regulators on Monday to let it raise the amount it charges customers, citing a 22 percent increase in the
price of natural gas used to create power since mid-2003.
Under the proposed increase, which will most likely go into effect by the end of the year, a home using 1,000 kilowatt hours a
month would see its bill go up by $11.38. A small business using 2,500 kwh a month would see its bill go up $27.85.
Reliant's news comes on the heels of Friday's announcement from CenterPoint Energy that Houston's natural gas bills are going up. The company said its customers would see bills
about 16 percent higher, or about $7.30 on average, also because of higher natural gas prices.
Including two smaller increases CenterPoint asked for this year, the average Houston residential customer will have seen energy bills rise a little more than $20 a month in 2004.
And it won't stop there. CenterPoint is asking the Public Utility Commission to let it charge power companies more money to use its transmission lines — a request it is allowed to make under the
state's electricity deregulation laws.
Companies could pass those costs on to customers, meaning even bigger bites out of Houstonians' pocketbooks.
Reliant officials said that while most other Texas power companies raised their rates once or twice this year, they tried to
delay the price request until after the summer months, when electricity use peaks.
"We had also hoped that natural gas prices would moderate, making this increase unnecessary," said Jim Robb, senior vice president of retail marketing at Reliant.
But prices have done everything but cooperate.
Natural gas prices have grown at a staggering pace in the last couple of months, said Mike Schick, president of Houston consulting firm Energy Analytics. In mid-September, gas was
trading on the New York Mercantile Exchange for $4.72 per thousand cubic feet. On Monday, it closed at $8.72.
There have been plenty of natural gas price spikes in the past, including at least two in the last four years when it hit a record of
$10.10. But in each of those cases, gas futures for the following 12 months were trading for significantly less, about $6.60, said Schick.
"The 12-month strip we're looking at now is $8.22," Schick said, meaning the market is not expecting prices to fall. "We're not just looking at a one-month phenomenon."
Despite predictions of a cold winter, analysts don't expect the country to run out of natural gas.
David Pursell, a principal with Pickering Energy Partners, notes that the stockpiles companies build up for the winter will reach a
record high in the coming weeks. Supply is also just about matching U.S. demand.
Future prices remain high, however, because oil is expected to remain relatively expensive for the foreseeable future and there
seems to be little indication that new supplies of natural gas will be coming to market anytime soon.
"Traders are realizing it will take higher prices to ration demand on the margin and higher prices to incentivize the development
of (liquefied natural gas) and the construction of the Alaskan natural gas pipeline," Pursell said.
Reliant can only ask for a fuel rate increase twice a year if natural gas prices increase by a certain percentage over a 20-day period. Between Jan. 1 and Nov. 15, the price has to rise
by at least 5 percent for an increase to occur. Between Nov. 16. and Dec. 31, the price has to increase by 10 percent.
"I don't think anyone wants to go to the PUC to ask for a price
increase, because overnight you become the least popular guy in
town," Pursell said. "But gas is simply expensive right now."
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