Posted by R. Neal

Despite dire warnings of energy shortages and skyrocketing natural gas prices, the Senate this week voted down additional funding for the Low-Income Home Energy Assistance Program that would assist low-income families with their heating bills this winter.

According to the article, Sen. Jack Reed (D-RI) "cited estimates that those who heat their homes with fuel oil will need $1,600 this winter, up $380, while the cost of using natural gas for heating could rise $500 to $1,400."

Some local governments are looking at ways to provide assistance. Louisville, Kentucky for example, is considering a proposal to make $250,000 available for assistance after the Kentucky Public Service commission approved Louisville Gas and Electric Co.'s request for a 64% increase in natural gas prices.

Here in East Tennessee, utility companies have been bombarding us for weeks with warnings about natural gas price increases. The Knoxville paper reported last week (registration required):

KUB customers' natural gas bills could increase 50 to 60 percent this winter, largely because of hurricanes' disruption to the flow of natural gas from the Gulf of Mexico.


Mike Bolin, KUB vice president of business services, said Hurricane Katrina "hit the (natural gas) producing facilities offshore in the Gulf of Mexico at the end of August. Less than a month later, Hurricane Rita came in and what wasn't hit by one hurricane was hit by the other. These hurricanes were very intense and caused a great deal of damage."

The Maryville paper reported nearly a month ago:

Natural gas prices are forecast to skyrocket this winter, as demand exceeds supply and distribution facilities reel from the effects of two Gulf Coast hurricanes.

A spokeswoman for Atmos Energy, which provides natural gas to 18,000 Blount County customers, said costs to Blount Countians will increase by 54 percent next month when compared to October [2004].

"The increase is totally due to increased gas cost," said Atmos public affairs manager Judy Moss.

She stressed the escalating cost of natural gas does not represent a "rate increase," as the corporation's rates as allowed by the state have remained static since 1996. The company is merely passing on its increased cost of supplying the gas, and Atmos will not realize any additional revenue, Moss said.


She said the effects of hurricanes Katrina and Rita on distribution networks and an increase in the wholesale cost of natural gas led to the increased cost to customers.

This is the refrain we he hear from energy companies all over the country. Supplies are tight. The hurricanes disrupted supplies. Demand is high. Etc.

Except something doesn't add up.

Click "there's more" for the rest of the story...

According to the DOE's Natural Gas Weekly Update for 9/29/05, "Natural gas spot prices declined this week," and "Spot prices declined $1 per MMBtu or more at trading locations outside of the West Coast as Hurricane Rita proved to be not as strong as anticipated at this time last week."

This week, the report for 10/20/05 says "Since Wednesday, October 12, spot prices decreased at virtually all market locations in the Lower 48 States." The report further states "Generally mild temperatures nationwide, expected mild temperatures for the weekend, and many storage facilities recording nearly full facilities supported a decrease in spot prices on Friday, which declined across the board by an average of 82 cents, with many declines of $1 or more."

The report also says that working gas in storage as of October 14 is "1.8 percent above the 5-year average inventory level for the week," and that the "net addition to storage was about 34 percent above the 5-year average net injection." The report concludes that "moderate temperatures, favorable economics, and possible industrial demand destruction owing to the elevated level of natural gas prices likely contributed to the increased level of injections for the week."

Now, I'm no expert on this and it all seems pretty complicated, but somehow "declining prices" gets translated to "rising costs", and "above average storage injections and inventories" gets translated to "severe shortages". And, "Hurricane Rita proved to be not as strong as anticipated" gets translated to "Hurricane Rita came in and what wasn't hit by one hurricane was hit by the other. These hurricanes were very intense and caused a great deal of damage."

That said, natural gas prices have more than doubled since June of this year (before any hurricanes struck). Why do you suppose that is? Who knows?

What we do know is that energy companies are racking up huge profits. Exxon-Mobil's net income nearly doubled in the third quarter as compared to last year. Gross profits for Atmos Energy have nearly doubled (PDF format) to almost $1 billion for the nine months ending June 30, 2005 as compared to the same period in 2004.

And regarding Atmos Energy, there's this (PDF format):
Tennessee Attorney General Paul G. Summers has filed a petition with the Tennessee Regulatory Authority asking it to determine whether Atmos Energy Corporation is overcharging its customers more than $10 million annually for natural gas service.


The Attorney General contends Atmos' delivery costs have declined significantly over recent years due to lower interest rates and corporate down-sizing in Tennessee, but these savings have not been passed on to consumers. The reasonableness of the rates for delivery of Atmos' gas has not been examined in nearly 10 years.


Similarly, the Kentucky Attorney General's Office has sought a hearing on similar concerns about Atmos before its Public Service Commission, asking the company to lower its rates by as much as $7.4 million.
So, according to the Tennessee Attorney General, it seems they pass along the increases but not the savings.

OK, then.