Virginia Natural Gas bills to shoot up by 35 percent

By Jacob Geiger

Consumers hurting at the gas pump and grocery store might want to brace for the next bit of bad news: Heating bills are going up - a lot.

The 260,000 Hampton Roads customers of Virginia Natural Gas will see - on average - a 35 percent increase in their annual bill over last year, the company said Tuesday.

The July 1 increase represents the fourth this year and is the largest. The biggest increases over the next year will come in the months of heaviest gas use. Collectively, a bill that would have cost $191 in February - representing the average use for a Virginia Natural Gas customer that month - would run $278 under the new rate.

The rising cost of corn has driven up food prices, and ongoing flooding in the Midwest could make things worse. While the per-gallon price of gasoline seems to have stabilized in Hampton Roads, the average price of $3.919 on Tuesday is about $1.09 more than it was a year ago, according to the AAA Web site.

The Virginia Natural Gas increase came because the price of natural gas is approaching levels not seen since Hurricanes Katrina and Rita hit the Gulf Coast in 2005.

But unlike those price spikes, there's no sign these increases will go away anytime soon, said Ann Chamberlain, the company's manager of gas supply. That means customers should brace for high heating bills this winter, she warned.

To obtain natural gas, the utility is paying $12 to $13 per million BTUs, up from $7 to $8 last summer, she said. BTUs, or British thermal units, are used to measure units of energy.

Natural gas typically is less expensive in the summer because demand is lower, allowing providers to stockpile cheap gas that is then used to partially offset high winter prices. But Chamberlain said less is being stored this year, and the high price of gas over the summer means that the savings won't be as pronounced come winter.

Chamberlain said she has never seen price increases like this during her 30 years in the business and can't explain why prices are so high.

"It doesn't seem to be a supply issue," she said. "I believe speculative trading may be having a large impact, but I can't tell you for sure."

The cost of gas makes up 70 percent of an average customer's bill, with administrative and distribution costs accounting for most of the rest. Natural gas providers typically seek quarterly adjustments to their gas supply costs. The companies then pass that on to customers with no profit. The sharply rising gas prices have forced the utility to raise rates four times in the past six months.

For customers, the cost of 100 cubic feet of gas, a unit known as a therm, will have increased from $1.01 in January to $1.65 starting July 1. The average use for a customer is 11 therms in July but more than 100 in February.

Mike Rose, trading director of Angus Jackson Inc. in Fort Lauderdale, Fla., said natural gas prices are rising now because higher oil prices drive up demand for natural gas.

"You have power plants that can switch from oil to natural gas," Rose said. "Now it's become prudent to power up for natural gas. The minute crude sells off and prices drop, I think natural gas will, too."

Rose said any hurricanes that hit the Gulf Coast this summer could send natural gas prices shooting up further, perhaps to the range of $14 to $16 per million BTUs.

In Hampton Roads, the state government and nonprofit groups provide help for residents to prepare for higher bills that will arrive this winter.

The Virginia Department of Social Services will take applications for assistance with heating bills at local DSS offices and on its Web site, www.dss.state.va.us, between Oct. 14 and Nov. 14.

The Southeastern Tidewater Opportunity Project - a nonprofit - refits about 300 homes a year at no charge through its weatherization assistance program. To qualify, a single-person household must have an income below $15,000. Multiple-person households are eligible if total income is less than $15,000 plus $5,400 for each additional person in the house.

Improvements include placing weather-stripping under doors, repairing furnaces and hot water heaters, and adding insulation to attics. The improvements would normally cost about $3,000 per house, said Glennis Johnson, the assistant program administrator. Those interested in applying may call (757) 858-1397.

"This time of year people aren't calling," Johnson said, "but this is a good time to get our help."

Jacob Geiger, (757) 446-2643, jacob.geiger@pilotonline.com