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Heating fuel costs to escalate

September 22, 1999|By BRENDAN KIRBY

Tri-State area residents lulled by mild winters and last year's low fuel prices may find heating their homes over the coming winter will take a bigger bite out of their wallets, according to representatives of some local fuel companies.

Oil, propane and kerosene will cost between 10 percent and 30 percent more this winter than last year, companies predicted.

"The cost is definitely going to be higher," said J. William Walter, operations manager of HJ Tanner Inc. in Chambersburg, Pa. "We never know what it's going to be until we pick it up at the terminal."

Customers of HJ Tanner, which distributes heating oil, propane and kerosene throughout Franklin and Fulton counties in Pennsylvania, will pay 10 percent or 15 percent more, Walter estimated.

Electric heat users should fare better; Allegheny Power spokeswoman Midge Teahan said the utility has no plans to seek a rate hike.

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Columbia Gas, which sells natural gas to about 13,000 customers in Washington County, plans to ask the Maryland Public Service Commission this week for a rate hike.

Columbia spokesman Keith Uhrig did not say how much of an increase the utility would seek.

Uhrig said the company's rates for about 3,800 customers in Franklin and Fulton counties in Pennsylvania will not change.

J. Randall Thompson, president and CEO of Thompson Gas in Boonsboro, said this year's cost of propane - about 20 percent more than last winter - is about a nickel a gallon above the historical average.

"Last year was the lowest market we've had in 20, 30 years," he said.

Two major factors contributed to last winter's low prices - a worldwide glut of oil and a mild winter.

Home fuel costs hit their low point in February, "which is totally out of character," Walter said.

Last winter, crude oil prices bottomed out at $12 to $14 a barrel, Clarence Reese Jr., manager of the Southern States Cooperative plant in Falling Waters, W.Va., said.

When oil producing countries cut production this summer, those prices rebounded. Today, crude oil is selling for about $24 a barrel, Reese said.

"That gets passed along to the refineries, and that gets passed along to us," he said.

As a result, the price to the consumer has increased by about 20 or 30 cents a gallon, according to Reese.

For the average customer who uses about 600 gallons of heating oil per year, that's an increase of $120 to $180.

"Prices have already topped out over and above what last year's maximum prices were," he said.

Higher prices do not necessarily translate to higher profits, Reese said. There is tremendous pressure on fuel companies to absorb higher costs, he said.

"As prices get higher, retail companies make less, because our margin goes down," he said. "We don't drive the cost of the product. But we're the ones who get the feedback."

Companies say another factor is pushing up prices - Y2K. Fear over the so-called millennium bug, which could cause problems if older computers misinterpret 2000 as 1900, has led to increased demand for alternative heating methods that will operate even if the power goes out, they say.

William G. Shawley Sr., president of Shawley's L.P. Gas Co. in Maugansville, said sales of unvented heaters that do not use electricity are running about 25 percent higher than this time last year.

The longer people wait to buy those kinds of devices, the more expensive those products will be, Shawley predicted.

"That's just simple supply and demand," he said.

After three straight mild winters, Shawley said the law of averages could catch up with homeowners this year.

"Winters tend to run in cycles," he said. "Some of that is pretty much unscientific."

Walter, of HJ Tanner, said he has no idea what kind of winter the area will experience. But he does knows what kind of winter he'd like.

"As a fuel distributor, I certainly hope it's going to be a colder winter," Walter said.

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