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Home heat fuel prices - What goes up, might come down

August 17, 2008|By ARNOLD S. PLATOU

TRI-STATE - Betty Wurster was horrified the week before last when she got her latest bill from Columbia Gas of Maryland.

Her new budget payment for natural gas had jumped to $169 per month - a 44 percent increase over what she had been paying at her half-a-double house for the past year.

"I think it's outrageous because I've never had that much of an increase," the Hagerstown resident said. "I mean, what's to prevent them from doing it 75 percent?"

Wurster is not alone.

The phones at Columbia Gas have been ringing a lot this month since the utility, grappling with rising prices and predictions of supply-disrupting hurricanes, began notifying its budget plan customers of the increase, spokeswoman Leslie Orbin said last week.

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About 28 percent of the utility's 33,000 customers in Western Maryland and 4,800 in Pennsylvania's Franklin and Fulton counties are on the budget plan, Orbin said. In all, Columbia has 13,500 customers in Washington County alone.

Those on the budget payment plan - which can keep payments nearly the same from month to month for a year - will be paying an average of 37 percent more than what they paid under last year's plan, Orbin said.

Columbia's other Washington, Allegany and Garrett county customers, whose bills can change every month based on usage, already have been hit with increases.

On average, their bills rose 22.8 percent in July to $138.76 per month compared to the $112.99 they paid in March, she said.

The good news for both kinds of bill payers might be that market prices around the globe are dropping.

So in the next month or two, the local bills could decrease, too - if nothing else changes.

"It is difficult to predict what natural gas prices will do and, while we see them coming down now, what we don't know is whether they will go back up again" before the rates are reset, Orbin said.

Has the bubble burst?

As with natural gas, the prices of crude oil, from which fuel oil is obtained, have increased rapidly.

The gyrations of prices - accelerating wildly for several months this year and then, suddenly, the past few weeks, dropping again - have been dizzying to consumers and home heating oil suppliers alike, an industry spokesman said.

"In the last month or so, we don't know if the bubble has burst ... or if this is another aberration, or where we're going," said Pete Horrigan, executive director of the Mid-Atlantic Petroleum Distributors Association.

Covering Maryland and Delaware, the organization represents more than 100 companies that deliver heating oil or sell gasoline and about 100 associated businesses. The members deliver about 90 percent of the heating oil in Maryland, Horrigan said.

On the world markets, the price per barrel of crude oil doubled this year from $71 per barrel last August, but recently has dipped as low as $114, Horrigan said. "There's a current sigh of relief" at that, but no one knows what's coming next, he said.

Horrigan said the main problem is the United States' lack of an official federal energy policy fanning "speculation and, therefore, wild price fluctuation." He said a clear energy policy would set targets for how energy needs will be met through use of wind, solar, crude oil and other resources.

As prices have increased, heating oil dealers have become "very competitive and very concerned," Horrigan said.

Unlike the giants of petroleum reporting billions in profits, local dealers are "struggling to maintain their profitability. And it's very difficult over high-priced times to do that," he said. "... If a heating oil dealer is making 2 to 5 percent profit on his sales, he's doing a great job."

Going up ... coming down ...

The price consumers pay to Columbia Gas has two parts - the delivery charge and the natural gas charge.

"Delivery is pipes, meters, employees, sending employees out to read your meter," Orbin said. She said that charge has not changed since 1998.

The gas charge, by law, is the same cost that Columbia Gas is paying on the open market for what other companies have drilled, Orbin said.

"We're required to pass that on, dollar for dollar, without any markup or profit," she said.

In Maryland, rate changes must be approved by the state Public Service Commission. In Pennsylvania, they must be approved by the state Public Utilities Commission.

Every June, Columbia Gas analyzes such factors as current gas prices, weather patterns over the past 30 years and each customer's annual usage to project what each should pay over the next budget plan period from August through the following July.

When the budget plan bills were being calculated in June, it looked as though market prices would continue increasing, Orbin said.

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