Winter Heating Prices Scare States
By Eric Kelderman, Staff Writer
Sticker shock at the gas pump isn't the only energy problem confronting states after Hurricane Katrina ravaged the Gulf Coast early this month.
The storm has shut down oil rigs and refineries in the area, sending gasoline prices toward the $3-a-gallon mark and spurring dozens of states to consider curbing the costs of driving. But it also reduced the region's output of natural gas by 38 percent -- about 7 percent of the nation's total -- according to the U.S. Department of Energy. That has increased already high costs of the popular fuel, with predictions of 37 percent to 70 percent increases in some parts of the country.
The fear of a natural gas spike is spurring officials to seek more money to help low-income residents pay for heating this winter, while others are encouraging energy efficiency, and in the case of Connecticut, challenging the way that utilities charge customers.
Gasoline costs are foremost on state lawmakers' minds since the hurricane hit the oil-rich region. Georgia already has suspended the state's gasoline tax, and West Virginia Gov. Joe Manchin (D) has promised to prevent an annual increase in his state's gas tax.
In addition, Democratic governors in Delaware, Maine, Michigan, New Jersey, Pennsylvania and Wisconsin have asked President Bush to take action against skyrocketing gas prices, and 45 states' attorneys general are making inquiries into potential price-gouging. In Florida, the Department of Children and Families proposed temporarily suspending monthly visits to nearly 50,000 foster children to save on driving costs, but Gov. Jeb Bush (R) nixed that idea the day after it was reported in the media.
But the storm's impact on the natural gas supply also is emerging as a problem that could sting states across the country.
Fifty-two percent of heated U.S. homes use natural gas, and demand has grown steadily as electric utilities increasingly turn to natural gas as a cleaner-burning alternative to coal. But domestic supplies of natural gas have leveled off, and prices have more than doubled in the past three years. Now, the federal energy department estimates that the storm will cost average consumers 37 percent to 50 percent more than they paid for their heat last winter, and parts of the upper Midwest could see a 70 percent increase for natural gas.
The costs of other heating fuels also are projected to rise: heating oil up to 31 percent more; propane up to 40 percent more and electric heating up as much as 17 percent.
"The bottom line is, the era of cheap energy is behind us," said state Rep. Carl Holmes (R) from Liberty, Kan., a vice chairman of the Energy and Electric Utilities Committee of the National Conference of State Legislatures.
Scott Pattison, executive director of the National Association of State Budget Officers, said higher natural gas costs are going to cut into states' bottom lines. "Overall, as part of the state budget, it's not huge at this point, but we certainly expect that to change," he said.
One pressing concern for states will be low-income residents who need help paying their heating bills this winter. Higher prices for heating fuels could push more people to seek that assistance, said Mark Wolfe, spokesman for the National Energy Assistance Directors Association. The organization represents state officials who manage the federal Low-Income Heating Assistance Program (LIHEAP) block grants.
Heating bills are projected to rise $611 on average this winter -- more than most low-income families receive in aid, Wolfe said. His association is pushing Congress to increase the amount of LIHEAP money available to the states -- from $1.9 billion currently to the full $3.4 billion authorized in the federal budget.
Montana Gov. Brian Schweitzer (D) supports more federal money but also has proposed an additional $9 million in state taxpayers' dollars to help the poor pay their heating bills. Schweitzer also wants the state to expand programs to weatherize homes and conserve energy.
Pennsylvania also is stressing conservation and has scheduled workshops to help municipal governments reduce their energy costs.
Connecticut Attorney General Richard Blumenthal is challenging the way that utilities in his region charge for power -- a system that sometimes allows coal and nuclear power plants to link their price to higher oil and natural gas costs. Blumenthal's office estimates that change could save consumers and businesses up to $970 million over the next year.
Ellen Foley, a spokeswoman for the region's wholesale power market, said the real problem is that there are not enough diverse sources of energy: Oil and natural gas now provide more than 40 percent of the Northeast's electricity.