The impact of Hurricane Katrina on natural gas production in the Gulf of Mexico has aggravated an already critical balance between supply and demand in the U.S.
In addition, record high crude oil prices also have contributed to higher natural gas prices. It is anticipated the average Ameren Illinois residential customer will pay $15 to $30 more each month assuming normal winter temperatures. The increase for customers will be higher if temperatures are colder than normal.
Ameren's Illinois utilities purchase natural gas from wholesale suppliers located in various U.S. natural gas production areas. The wholesale price is not regulated, but rises and falls based upon market conditions caused by supply and demand. The Ameren utilities pass the cost of natural gas on to customers, dollar for dollar, through the purchased gas adjustment (PGA) rate. About three-fourths of a residential customer's bill is the actual cost of natural gas from these suppliers recovered through the PGA, without any markup in price.
Ameren's Illinois utilities do not profit from the PGA. Listed as the "Gas Charge" or "PGA" on individual customer bills, the PGA is recomputed each month and may go up or down depending on the wholesale price of natural gas. The PGA is a matter of public record and is available on the Ameren Web site (www.ameren.com).
Effective Oct. 1, the AmerenIP PGA rate will go from 77.26 cents to 96.87 cents per therm; the AmerenCILCO PGA will go from 88.12 cents to 95.54 cents per therm; the AmerenCIPS PGA will rise from 92.67 cents to 105.42 cents per therm; and the AmerenCIPS/Metro East (the Alton-East St. Louis area) PGA will go from 78.63 to 106.57 cents per therm.
The PGA rate is reviewed and approved by the Illinois Commerce Commission to ensure proper cost recovery and that Ameren management was prudent in the purchasing of natural gas.
"Natural gas prices have increased dramatically this past summer, driven by record high prices for crude oil and Hurricane Katrina, which disrupted natural gas production in the Gulf of Mexico and Louisiana. This region produces more than 25 percent of the natural gas in the U.S.," says Scott Glaeser, vice president of Gas Supply and System Control for Ameren.
"Furthermore, wholesale natural gas prices also were impacted by this summer's exceptionally hot weather, which increased the demand for natural gas used by natural gas-fired electric power plants.
"Meanwhile, U.S. natural gas production has stagnated or even declined. Many promising areas for natural gas exploration are presently off-limits due to federal policies or environmental regulations," Glaeser says.
Nonetheless, Ameren takes significant steps to dampen the impact of wholesale gas price volatility on its natural gas customers, including:
• Utilizing sophisticated financial hedging strategies and negotiating both long- and short-term natural gas supply contracts.
• Purchasing natural gas at the lower prices and injecting the natural gas in extensive underground storage fields, which provide almost half of the natural gas required during the winter heating season.
• Diversifying interstate pipeline suppliers and accessing multiple production areas to bring natural gas to Illinois.
"Ameren has secured adequate supplies of natural gas to meet customer needs, but the cost for natural gas will be significantly higher than during the last heating season," says President of Ameren Illinois Energy Delivery Scott Cisel. "We are concerned about the impact higher prices will have on our customers and we are very willing to work with them to help them manage in establishing special payment arrangements. We also encourage our customers to use energy wisely and to conserve when possible.
"We specifically are asking our customers to seriously consider Budget Billing because it will level out their monthly payments, especially when considering the financial impact of high winter heating bills," Cisel adds.
By enrolling now, customers can begin leveling out their monthly payments. No additional deposit is required for Budget Billing. The plan allows customers to pay an average monthly bill amount based on the last 12 months of usage. The program is open to electric-only, natural gas-only and combination electric and natural gas customers. Customers can enroll in the program or drop out at any time.
To better manage rising natural gas costs, customers also can take steps to conserve energy. Examples of conservation steps include:
• Plug air leaks, apply caulk and install weather stripping.
• Use storm windows or plastic window covering.
• Turn down thermostats (every degree you turn down your thermostat will reduce consumption by 2-3 percent).
• Regularly change furnace filters.
• The water heater is the second largest user of natural gas in the home.
Turning a water heater to the lowest setting (usually 120 degrees F) and placing an insulated jacket over that water heater can save on energy bills.
Additional conservation suggestions are available on Ameren's Web site (www.ameren.com).
Ameren customers having difficulty paying their bills should call the Ameren company listed on their bills. Company representatives will work with customers on payment arrangements and refer eligible customers to agencies that may be able to help with energy assistance. Ameren's Dollar More and Warm Neighbors Programs are the region's largest privately managed energy assistance programs aimed at helping individuals and families in need of assistance pay their energy costs. In addition, the federal Low Income Heating Energy Assistance Program is available to eligible customers.
For information on how to contact LIHEAP or other sources of help, or for tips on how to manage energy bills and rates, customers should go to Ameren's Web site (www.ameren.com).
Ameren, through its subsidiaries, serves 2.3 million electric and more than 900,000 natural gas customers in a 64,000-square-mile area of Illinois and Missouri.