March 16, 2010

Rate hike flames out for natural gas users


— By

Staff Writer

Natural gas customers got some good news this week: Their bills are not going up as much as expected.

The Maine Public Utilities Commission on Monday approved a 3.36 percent rate increase for Northern Utilities customers, considerably below what the state's largest natural gas distributor originally requested.

Earlier this month, Northern Utilities had asked for a 17 percent increase. But natural gas prices fell unexpectedly, so the company adjusted its request downward, said spokeswoman Sheila Doiron.

The typical customer who uses gas for heat, hot water, cooking and clothes drying will see an average increase of $2.81 in monthly bills during the next 90 days, Doiron said.

The increase is called a ''mid-course correction.'' Northern Utilities and other gas companies only make profit on delivery of the gas, but they also pass along the fuel price to their customers through rates approved by the PUC.

Before the latest rate increase, Maine customers' summer gas bills were already up 9 percent from last summer.

The price of natural gas has been so volatile that the summer rate, which covers the months of May through October, was out of whack with what the company was charging customers. As it turns out, the price was not as out of line as Northern Utilities had thought in early July, when it requested the double-digit increase.

Gas prices fell more than 11 percent from July 16 to July 24, according to the U.S. Energy Information Administration. During the same period, New York Mercantile Exchange futures contracts for August declined by 14 percent.

The price drop is due to falling demand, triggered in part by cooler summer temperatures. Less energy was required from gas-fired power plants.

Doiron said her company does not foresee any increases in the short-term, but prices could rise again, forcing a request for another mid-course correction. If not, the next rate request would be for the winter period of November through April. She said her company does not yet know what that will be.

Public Advocate Richard Davies, who represents the interest of Maine ratepayers and consumers, said the lower rate increase highlights just how volatile the natural gas market is. ''There are spikes and valleys from hour to hour,'' he said.

Davies cautioned consumers against making any long-term decisions about switching to another fuel source, based on the latest drop in natural gas prices. He said all fossil fuel prices are expected to increase.

''It is not a good time to make a long-term decision based on short-term information,'' Davies said.

Northern Utilities has 46,000 customers along the New Hampshire and Maine coasts. It is owned by NiSource Inc., a Merrillville, Ind., company that is selling Northern Utilities to Unitil Corp., a New Hampshire holding company.

Staff Writer Beth Quimby can be contacted at 791-6363 or at:

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