What’s happening with natural
gas prices? Nationally, natural gas prices have more than doubled in the past
three years, because the production of new gas supplies has not kept pace
with increasing demand. Natural gas is increasingly popular for use in homes,
businesses, factories and electric power-generation because it is efficient,
clean and reliable. This demand/supply imbalance has sharply increased market
prices over the past three years.
Gas prices have been volatile the
past few years. Have we seen more of the same this year? Yes. Natural gas is one of the most volatile commodities traded on
the New York Mercantile Exchange, or Nymex.
National market prices fluctuate widely, up and down, depending on such factors
as hotter-than-normal southern weather and Hurricane Katrina, which disrupted
the production and pipeline transportation of natural gas from the Gulf of
Mexico. Also, the cost of competing fuels, such as oil, also can impact natural
gas prices.
Natural
gas is primarily a domestically produced fuel while the United States has
to import more than half of the oil its uses. Oil prices never used to have
an impact on natural gas prices. Why have rising oil prices also led to rising
natural gas prices now? Historically, the factors that led to rising oil prices, such as
political instability or war in major production areas, such as the Middle
East, did not affect U.S. natural gas prices, because more than 90 percent
of the natural gas used in this country was produced domestically. Many large
industrial customers can switch between natural gas and oil. In the past,
in times of rising natural gas prices, these customers would switch to lower-priced
oil, thus relieving demand and upward price pressure on the natural gas market.
Today, however, with oil prices spiking at prices of upwards of $60 or $70
per barrel, many of these customers cannot afford to switch to oil in the
face of rising natural gas prices. Furthermore, to cope with rising oil prices,
large industrial customers who can switch between natural gas and oil have
been switching from oil to natural gas, which further increased demand, and
thus, prices, for natural gas.
Could you explain some of the
market factors that have led to rising natural gas prices at the national
level? Over the past few years, the construction and operation of dozens
of new, natural gas-fired electrical generation plants has increased the overall
demand for gas nationally. Unfortunately, the new gas production has not kept
pace with that increasing demand.
Natural gas costs seemed relatively
low in the 1990s. What happened?
During the 1990s, consumers enjoyed natural gas at affordable prices because
available natural gas supplies exceeded customer demand. In the year 2000,
increasing demand and stagnant domestic natural gas production had combined
to increase prices sharply. Supply and demand are now in a very tight balance
and changes in the weather and economic activity have an almost immediate
impact on the wholesale price of natural gas.
What impact does weather have on
national market prices for natural gas?
Weather can exert major impact on gas prices. For example, this past winter,
warmer-than normal weather in December 2004 helped lower national market gas
prices. For another example, sustained periods of colder-than-normal winter
weather in 2000-2001, and again in 2002-2003, resulted in sharply higher national
market natural gas prices and depleted utilities’ gas storage inventories
to historically low levels. In the past year, the industry has replenished
gas natural gas storage levels nationally, but the natural gas production
still has not kept pace with increasing demand on the national market.
How can the industry resolve the
current imbalance between natural gas supply and demand, to return prices
to more reasonable levels?
The solution to the current natural gas supply/price crunch is to increase
the supply of natural gas on the market. Boosting natural gas production would
moderate market prices in the short term, and result in more reasonable prices
in the long term.
How quickly could new gas supplies
from new exploration and production activity flow into the national market?
Even with dramatic production efforts, it typically takes six to 18 months
to bring new wells into production and to bring additional gas supplies from
those new wells to the market.
Why is it so hard for gas
producers to keep up with demand?
Producers are working hard just to maintain current production levels. The
6,000 companies that produce natural gas in the United States, including Dominion
E&P, face some stiff challenges:
Many wells that have produced abundant natural gas
for years are becoming depleted. For example, during the last 10 years,
average depletion rates have climbed from 16 to 28 percent each year,
according to the Independent
Petroleum Association of America. In simple terms, this means drillers
must produce additional volumes of one-fourth of existing production each
year just to stay even.
It is sometimes difficult and more costly to pull natural
gas from mature reserves. That’s why it’s important for producers
to be able to move into fresh supply areas and use the best technologies
to find and produce more natural gas.
Even when producers hold valid leases, they often face
months of delays in getting federal or state permits to start working
on bringing new energy supplies to market.
What factors are preventing
natural gas producers from moving into new, potentially promising natural
gas producing areas?
Production in existing major onshore natural gas fields, such as Texas, Oklahoma,
Appalachia, and the major offshore areas of the Gulf of Mexico has already
peaked, and the industry must turn to new areas within the United States,
such as offshore areas in the eastern Gulf of Mexico and off the East and
West Coasts. However, federal regulations currently prohibit any exploration
and production activity in these areas.
Also, access to potentially rich natural gas deposits
in large portions of the Rocky Mountain region is severely restricted. These
current restrictions severely constrain the potential for increased natural
gas production in these areas.
Federal and state officials must take the lead in overcoming
a pervasive “not in my backyard” attitude toward energy infrastructure
development. As a nation, we must reevaluate current restrictions on access
to new sources of supply in light of technology developments that have reduced
the costs, uncertainty and environmental impact of gas exploration and production.
Drilling more new wells can bring
more gas to market in the short run, but if federal regulators fail to permit
drilling in previously untapped areas, in reality, will we see a long-term
solution to the tight natural gas supply situation that has led to sharply
higher prices over the past five years?
No. Drilling more wells in established production areas does bring more gas
to the market, at least in the short term, but, ultimately, these new wells
just deplete existing production areas faster, and the new wells are not as
productive as the earlier wells drilled in these areas. It’s like when
you get a 32-ounce milk shake. If your friends want to share that milkshake,
they’ll put in their own straws. However, unless they also buy a bigger
milkshake in a bigger cup, those extra straws, like new gas wells drilled
in existing production areas, will just empty that original 32-ounce milkshake
faster.
Until, and unless, new areas are
opened to exploration and production activity, what can the energy industry
do to fill the natural gas supply gap?
Until such drilling restrictions are removed, the industry must turn to non-traditional
sources of natural gas, such as imports of liquefied natural gas (LNG). LNG
imports, which are transported in tanker ships from such sources as Trinidad,
Algeria, Nigeria and Venezuela, are processed at specialized ports, such as
Dominion’s Cove
Point, Maryland, facility. LNG imports, which now account for less than
1 percent of U.S. natural gas consumption, could account for 10 to 15 percent
of gas consumption 15 to 20 years from now, if pursued aggressively.
What can natural gas customers
do to minimize the impact of rising natural gas costs on their family budgets?
Dominion encourages customers to use energy more efficiently. For example,
during hot weather, customers can cut back on their use of electricity, in
order to reduce the amount of natural gas needed for electrical generation.
Before winter, customers can improve their home insulation and have their
furnaces and other natural gas appliances inspected by a qualified professional
contractor to maximize efficiency and comfort.
Does Dominion offer payment plans
that allow customers to spread out heating bills over the whole year?
Dominion’s Budget Billing Plan
provides a way for customers to manage their gas bills to avoid seasonal fluctuation.
Budget Billing customers a pay a predetermined amount per month, to even out
their natural gas bills. Dominion bases the budget amount on gas rates and
customer usage over the past 12 months.
Why do customers’ budget
amounts vary over the course of the year?
So that the customer won’t have a high bill or large credit at the end
of the budget year, Dominion will review a customer’s budget amount
periodically. At that time, the budget amount may increase or decrease, depending
on changes in usage or rates.
Beside weather, what else
can affect a customer’s gas bill?
A wide range of factors can affect customers’ bills. They include:
Thermostat Temperature Settings — You
can save as much as 1 percent for every degree you lower your thermostat.
For example, you can cut natural gas usage for heating by 10 percent if
you turn down your thermostat from 75 to 65 degrees.
Furnace Efficiency — Newer, higher-efficiency
furnaces use less natural gas than older, less-efficient furnaces.
Home Insulation — Well-insulated homes
use less natural gas for heating than poorly insulated homes. Also, larger
homes generally require more natural gas for heating than smaller homes.
Does the number of natural gas
appliances in a home make a difference in an individual customer’s bill?
Yes. A home with only a natural gas furnace and water heater generally uses
less gas than a home also equipped with other gas appliances, such as gas
logs, gaslights, range and clothes dryer.
During the energy crunch of the
late 1970s and early 1980s, conservation was a big deal. Are Dominion East
Ohio customers continuing to conserve?
Yes. Conservation still makes good common and economic sense. Conservation
efforts by Dominion East Ohio and its customers have helped reduce average
residential natural gas consumption by 33 percent since December 1973. For
example, you can save as much as 10 percent a year on your heating bills simply
by turning your thermostat back 10 to 15 percent for eight hours.
Can people also save money by
turning down their thermostats at night?
Turning your thermostat down at night, for a minimum of eight hours, can save
an additional 1 percent per degree. Automatic setback thermostats can be set
to return overnight heat settings to daytime temperatures before you rise
in the morning. Turning down your thermostat requires a little bit of time,
but it costs you nothing to do and it can return big savings.
What are some other no cost or
low cost ways of saving energy and money?
Besides turning down the thermostat, customers can save energy easily by weather-stripping
their homes, insulating doors and windows. If a playing card fits in the crevice
of an outside door or window, you need more weather-stripping. You can block
off drafts at the bottom of doors with a rolled-up throw rug or towel. Lowering
your hot water heater thermostat from hot (160°) to warm (120°) saves
40 percent on water heating costs.
I’ve heard a lot about
Energy Choice. What is Energy Choice and can it save me money on my gas bill
this winter?
Energy Choice enables customers buy natural gas from another supplier, and
then have that gas delivered to their home or business by Dominion East Ohio.
Prior to deregulation, Dominion East Ohio provided two separate services –
first, purchasing natural gas for customer use, and then delivering it to
homes and businesses. Visit the
Energy Choice page.
What happens if customer choose
to buy natural gas from another supplier. Are they still Dominion East Ohio
customers?
If customers choose to purchase gas from another supplier, they remain Dominion
East Ohio customers for the transportation, or delivery, of that natural gas
to their home or business. Dominion East Ohio will continue to provide essential
customer services.
Who can sign up for Energy Choice?
Participants must be Dominion East Ohio customers and they must be current
with their payments to Dominion East Ohio in order to participate in the Energy
Choice program. Percentage of Income Payment Plan (PIPP) customers have a
separate gas choice program.
What role has the Public Utilities
Commission of Ohio played in developing the Energy Choice program?
The PUCO reviewed, approved and helped to structure this program and stands
ready as a free educational resource for customers. It also will play a key
role in resolving disputes customers might have with suppliers.
If I buy gas from another supplier,
what charges will I receive from Dominion East Ohio?
Just as you always have, you will pay Dominion East Ohio a delivery charge
based on the amount of gas you use, plus the same $5.70 monthly service charge
and all applicable riders.
What are the customer requirements
for changing suppliers?
Customers must be current with their Dominion East Ohio bills to participate
in Energy Choice. The customer must contact the supplier of their choice directly.
The supplier will then officially notify Dominion East Ohio. According to
the rules of the program, Dominion East Ohio cannot recommend a supplier or
sign up customers for any supplier.
If I use another gas supplier,
how will I know the gas I buy reaches my home or business?
No matter which supplier you choose, Dominion East Ohio will make sure the
gas you need is delivered to your home or business. Dominion requires Energy
Choice suppliers to bring sufficient natural gas supplies into Dominion’s
system to meet the requirements of all their customers. If a supplier fails
to do this, Dominion will makle up the difference, but charge a penalty to
the supplier.
Will I need a new gas meter or
gas line to participate in Energy Choice?
No. Your existing gas meter and gas line do not need to be changed. Dominion
East Ohio will continue to own the meter and you will continue to own and
maintain your gas service lines and houselines.
Does Dominion require customers
to participate in Energy Choice?
No. Energy Choice is strictly voluntary. Customers are not required to participate,
but Dominion East Ohio encourages customers to investigate the options available
through Energy Choice. Doing so will provide them with the ability to select
their supplier of natural gas from among several competitors. However, if
they do not want to participate in the Energy Choice program, they simply
do nothing, and they can continue to purchase gas from Dominion East Ohio,
exactly as they do now.
Where can I get specific information
on suppliers and their Energy Choice offers?
Under rules of the program, Dominion East Ohio cannot discuss specific supplier
offers, nor sign up customers with an Energy Choice supplier. The best source
of supplier information is the Public Utility Commission of Ohio's "Apples
to Apples" chart, which compares supplier offers. To get a free copy
of the “Apples to Apples” chart, which compares various supplier
offers, contact the PUCO at 1-800-299-7271 or visit the Commission’s
Web site at www.PUCO.ohio.gov.
Customers also may contact the Ohio Consumers’ Counsel, toll-free, at
1-877-PICKOCC (1-877-742-5622) or on line at www.pickocc.org.
What can customers do if they
know they’ll have trouble paying their gas bills?
Dominion East Ohio works with customers on an individual basis to help them
maintain service, which can be especially important during the winter months.
Customers who know they will not be able to maintain regular payments should
contact Dominion East Ohio immediately and not wait until receiving a shutoff
notice. It is always easier and less expensive to maintain service than to
have it reconnected after a shutoff. Customers can call, toll-free, 1-800-362-7557,
to inquire about Dominion East Ohio payment plans.
What kinds of energy assistance
programs are in place to help customers get through the winter without any
loss of their gas service?
Eligible, low-income customers may qualify for the Home Energy Assistance
Program, commonly known as HEAP. Under HEAP, the government pays a portion
of a customer's gas bill during January, February and March. Dominion East
Ohio also offers the Percentage of Income Payment Plan, or PIPP.
This winter, the state of Ohio
has allocated additional dollars to make more consumers eligible for the HEAP
program. Could you discuss the specific income eligibility guidelines?
The Home
Energy Assistance Program (HEAP) provides a one-time credit to customers’
heating bills. This year, in the state of Ohio, Governor Bob Taft hads made
available additional funds from the federal Temporary Aid for Needy Families
program to open the program up to more consumers. Typically, HEAP is open
to customers whose income is at or below 150 percent of thefederal poverty
level. But, this winter, HEAP will be available to customers with incomes
at or below 175 percent of the feeral poverty level, so more households will
be able to participate. Under these expanded Ohio HEAP guidelines, yearly
gross household income can be up to $16,748 for one person; $22,453 for two;
$28,158 for three; $33,863 for four; $39,568 for five; $45,273 for six; $50,978
for seven; and $56,683 for eight. For more than eight, add $5,705 per member.
For details, call HEAP at 1-800-282-0880.
How does the Percentage of Income
Payment Plan Work?
Under PIPP, customers may maintain their natural gas service by paying 10
percent of their monthly gross household income. Here are this winter’s
income eligibility guidelines, which are up to 150 percent of the federal
poverty level. For a household of one person, up to $14,355; two,: up to $19,245;
three: up to $24,135; four: up to $29,025; five: up to $33,915; six: up to
$38,805; seven: up to $43,695; eight: up to $48,585. For households with more
than eight members, add $4,890 per additional member.
Does Dominion East Ohio still
offer the EnergyShare program for needy customers?
This winter Dominion again offers the EnergyShare
program. Dominion designed EnergyShare to meet the heating needs of the unemployed,
the working poor and families facing a financial crisis with no other place
to turn. EnergyShare is Dominion’s 21-year-old winter heating energy
assistance program that helps customers in need pay their heating bills. In
the past 20 years, EnergyShare and its predecessor program, the People-Helping-People
Fuel Fund, have raised more than $2 million in overall last-resort energy
assistance for northeast Ohio families.
How does EnergyShare work?
The Salvation Army will again administer the new program, initially funded
by a $50,000 contribution from Dominion East Ohio, with aditional funds coming
from Dominion East Ohio customers and employees, and the shareholders of Dominion,
parent company of Dominion East Ohio.
Who is eligible to receive EnergyShare
assistance?
To be eligible for EnergyShare, the applicant must live within the company’s
service area, have a shutoff notice and must have exhausted other state and
federal fuel assistance resources. Seniors, age 60 and older, do not have
to have a shutoff notice. Applicants must meet one of the following:
Total household income is 150 percent of the federal
poverty level.
Head of household is unemployed
Have a demonstrated personal/family crisis.
Maximum assistance is $500 once per heating season.
EnergyShare helps individuals pay any type of winter heating bill —
natural gas, wood, oil, kerosene or electricity. For assistance, customers
should contact their local Salvation Army office, or they can call Dominion
East Ohio’s Customer Service Center at 1-800-362-7557, for the name
of The Salvation Army office nearest them. Salvation Army agencies will
begin accepting applications for assistance on January 2, 2006. To give
to EnergyShare, contributors should send their tax-deductible contribution
to: EnergyShare, The Salvation Army, P.O. Box 5847, Cleveland, OH 44101.
What can customers do to restore
winter natural gas service if that service already has been disconnected for
nonpayment of their bills?
Under a special winter reconnection procedure, established each year by a
Public Utilities Commission of Ohio order, eligible customers whose service
has been disconnected for nonpayment can restore their service by doing one
of three things: pay the amount of missed payments; pay the total balance
owed; or pay $175, whichever is the lowest amount. Eligible low-income customers
may qualify for up to $175 in assistance from the Emergency HEAP program,
to help them either avoid a shutoff or to restore their natural gas service.
This year’s special winter reconnection order will take effect around
October 17.
What is the "Housewarming"
program and who can participate?
Dominion East Ohio reminds eligible low-income customers to take advantage
of Housewarming, an energy conservation program that provides up to $1,500
worth of free weatherization materials—including installation. Housewarming
is a program administered through the Cleveland
Housing Network (CHN) and funded by Dominion East Ohio. CHN works with
various neighborhood development and housing groups throughout Ohio to provide
weatherization services, including insulation, furnace repair or replacement,
carbon monoxide detectors and energy conservation education. The program serves
about 1,200 homes annually. Households that participate in the Percentage
of Income Payment Plan, or the Home Energy Assistance Program may automatically
qualify for Housewarming. To be eligible, customers must have an active Dominion
East Ohio account and live in the company’s service area.
For more information, customers should contact the Housewarming agency in
their area. In Akron, call 330-773-6838; Ashtabula 440-998-4996; Canton 330-455-6385;
Cleveland 216-574-7100; Lima 419-584-1550; Marietta 740-373-7671; New Philadelphia
740-922-6692; Warren 330-394-8029; and Youngstown 330-747-7921.
