Natural gas prices drop 30 percent

But cold weather increases usage

By CHRIS VETTER

Journal Staff Writer

NEW ULM -- Natural gas prices have dropped 30 percent from peak levels, according to Bob Stevenson, director of New Ulm Public Utilities. However, the price drop is offset by increased natural gas usage due to a cold February.

Thus, customers likely won't see much change in their bill this month, but the monthly statements should drop in the immediate future, Stevenson told the Public Utilities Commission this week.

Last winter, the New Ulm Public Utilities Commission purchased gas at $2.50 per thousand cubic feet. The utility places a $2 markup cost that pays for the distribution system, meaning consumer prices last winter were typically at $4.50 per thousand cubic feet.

However, prices this winter have been four or five times the level of 2000. The utility purchased natural gas in January at $10 per thousand cubic feet, meaning customers paid $12.

Prices have begun to slide downward, Stevenson said.

"The gas that we bought in February was in the $7 range, and those bills will come out for the first week of March," he said.

Prices are expected to drop more in the coming months, Stevenson added. According to the futures market, gas will cost between $5-$5.50 for much of the rest of the year.

Consumers can expect price levels to stay well above the 2000 gas prices.

"It will never go down to those levels in the foreseeable future," Stevenson said.

The Public Utilities Commission is considering plans to purchase 20 percent of its natural gas in the futures market, which could hold down prices throughout the year.

"It will take some of the short-term variations out," Stevenson said. "We're going to avoid the price spikes."

Although the gas will be purchased, it will not arrive until a future date.

"We'll buy gas for December, but it won't be produced or delivered until December," Stevenson explained.

In past years, the utility has stored large quantities of gas in underground tankers, then tapped that supply during winter months.

Stevenson said this new plan would require occasional daily or weekly storage of surplus gas. For example, if the utility doesn't use all the natural gas it had purchased in the futures market on any given day, it must either be stored somewhere or burned.

"The pipeline doesn't store gas for us," Stevenson explained.

The utility is working on a contract arrangement to store surplus natural gas elsewhere, likely in Oklahoma or Kansas, for a day to a week until the supply is needed, he said.

Because of high natural gas prices, the utility is exploring the possibility of converting one of its boilers to burn coal. At the board meeting, the commissioners approved a plan to seek bids for a bag house and coal supply. A bag house, which could cost $2.3 million, works as a vacuum, removing carbon dioxide and ash before it leaves the plant.

Although bids will be collected, Stevenson said the Public Utilities Commission has not committed to constructing the bag house or converting to burning coal.