August 16, 2008 in Business

Spot-market natural gas prices dip

Avista, other utilities to seek rate increases
From staff and wire reports

Natural gas prices in Alberta, where the Northwest gets much of its supply, have dropped 40 percent since July 4, and industry specialists say the United States soon will be awash in the stuff as new technology opens up hard-to-reach reserves.

Many utilities, however, are still asking regulators to approve higher rates this fall.

Officials at Avista Corp. in Spokane plan to ask for a natural gas surcharge, which allows the utility to pass higher wholesale costs onto customers. Avista serves natural gas customers in Washington, Idaho and Oregon.

The utility initially anticipated a 20 to 25 percent surcharge request, but now expects a request of 20 percent or less, said Linda Jones, Avista spokeswoman.

“We’re still expecting a rate increase, but the story is much better than it was in July,” she said.

The request will be filed with public utility commissions within several weeks.

Northwest Natural Gas Co., headquartered in Portland, expects to ask regulators for up to a 40 percent rate hike beginning in November.

Declining market prices should partially reduce rate increase requests, said Randy Friedman, director of gas supply at NW Natural, but not by nearly as much as the spot market price has declined.

Utilities buy natural gas in advance of the winter heating season, locking in contracts and storing part of the gas until it’s needed.

Natural gas prices tend to be highly volatile, said Kevin Christie, director of Avista’s natural gas supply. By buying ahead, utilities try to buffer the price volatility for customers, he said.

One question mark for prices is the hurricane season, which picks up steam in August and September. An active storm season is expected. Even the threat of loss of natural gas production in the Gulf of Mexico could send prices higher, Christie said.

An industry study in July, meanwhile, concluded the country may have far larger gas reserves than previously estimated.

New drilling technologies are letting producers tap gas trapped in previously impermeable shale. The group estimated current reserves would last 118 years at current production rates.

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