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Published: Tuesday, 5/28/2002

Natural gas prices soar, marketers few


If you renewed a residential natural-gas contract with an independent marketer a few months ago, you might consider yourself lucky.

Wholesale natural gas prices have been more than twice as high this month as in February and contracts offered by independent marketers in the Columbia Gas of Ohio service territory appear to be fewer and higher than usual.

Mx Energy, Inc., based in Stamford, Conn., offered one-year and two-year contracts at 68.5 cents per 100 cubic feet before sales tax last week. But most customers - many of whom had contracts renewed in the winter or early spring - are paying less than 40 cents per ccf, said company President Jeffrey Mayer.

Some of the seven independent suppliers competing locally suggested their contract prices - which are almost all higher than Columbia Gas's current variable rate - might fall soon. But many said Columbia's price is likely to rise and there are, of course, no guarantees in the energy market that has been more volatile in recent years.

“The more you know about energy prices, the more you realize that nobody knows,” Mr. Mayer said. “If there is war in the Middle East, prices are going to the moon. If the summer is hot, prices are going to the moon.”

On the other hand, if cooler than usual weather continues, prices likely will drop because there will be less demand for natural gas. Natural gas fuels many new electric generating plants that are used only on the hottest days of the summer and other times when electricity usage peaks.

One reason prices did not dip as low as anticipated this spring and started rising earlier than usual is because more such electric plants are being built, said Greg Collins, president of Vectren Source, LLC, in Evansville, Ind.

Prices are higher in part because crude oil prices went up this winter and spring due to supply disruptions in the Middle East. Many industries can use either oil or gas and their prices tend to follow each other.

But natural gas prices apparently aren't high enough yet to encourage more drilling. Far fewer rigs are operating compared to last year when prices were high.

Signs that the economy is about to rebound also have led to higher natural gas prices.

Plus, at least one independent marketer, New Power, is no longer competing. It was partially owned by Enron Corp. and used Enron as a supplier.

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