Natural Gas Prices — Frequently Asked Questions Dominion East Ohio

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1. 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.
   
   
2. 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.
   
   
3. 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.
   
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4. What is Dominion East Ohio’s current natural gas price?
   Rate information and tariff information can be viewed online.
   
   
5. 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.
   
   
6. 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.
   
7. 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.
   
   
8. 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.
   
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9. 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.
   
   
10. 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.
      
      
11. 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.
    
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12. 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.
    
    
13. 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.
    
    
14. 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.
    
    
15. 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.
    
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16. 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.
    
    
17. 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.
      
      
18. 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.
    
    
19. 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.
    
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20. 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.
    
    
21. 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.
    
    
22. 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.
    
    
23. 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.
    
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24. 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.
    
    
25. 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.
    
    
26. 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.
    
    
27. 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.
    
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28. 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.
    
    
29. 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.
    
    
30. 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.
    
    
31. 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.
    
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32. 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.
    
    
33. 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.
    
    
34. 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 the federal poverty level. But, HEAP is now available to customers with incomes at or below 175 percent of the federal poverty level, so more households will be able to participate. Here are the expanded Ohio HEAP guidelines: Summary Guidelines | Detailed Guidelines.
    
    
35. 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.
    
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36. 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.
    
    
37. 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.
    
    
38. 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.
      
      
39. 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.
    
    
40. 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.

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