New billing system could raise gas bills

State regulators yesterday approved results of an auction that, beginning April 1, will help determine future monthly natural gas rates charged by Columbia Gas of Ohio.

Based on current commodity prices, customer bills for the heating fuel could rise from the low levels of this winter.

On Tuesday, a group of seven independent gas suppliers submitted their lowest prices at which they projected they could supply natural gas to Columbia Gas' customers through 2011. The lowest price and winning bid, approved yesterday by the Public Utilities Commission of Ohio, was 19.3 cents per 100 cubic feet.

Under a new system approved in early December, monthly rates to Columbia Gas customers will be based on a combination of the winning bid price and the end-of-the-month price of natural gas on the New York Mercantile Exchange, or Nymex.

"We are pleased with [Tuesday's] auction results," Alan Schriber, PUCO chairman, said. "The auction netted a positive result with the new retail price adjustment and demonstrated that the natural gas market will provide a better commodity price for Columbia customers than the gas cost recovery mechanism."

Janine Migden-Ostrander, the Ohio Consumers' Counsel, said she was pleased. "The rates determined by wholesale auctions have produced savings for consumers" in other areas of Ohio where other utilities have switched to new pricing method, she said.

But Jim Halloran, an energy analyst with the Russell Energy Advisors unit of Financial America Securities in Cleveland, said Columbia Gas customers may not be getting a better price right now.

In March, for example, the utility will charge customers 44 cents per 100 cubic feet. That rate, lowest in close to a decade, is because of the huge surplus of available natural gas nationwide.

But under the new formula, customers would pay close to 70 cents starting in April - based on the current Nymex price of about 49 cents and the 19.3 cents from the auction, Mr. Halloran said.

"Would I be grumbling about that as a customer? A little bit," he said.

But he said customers at least will have a clearer pricing system, needing only to keep tabs on Nymex prices, and add 19 cents.

"The way Columbia Gas used to figure out their rates was a bit of a mystery," he said.

Two other gas utilities use an auction process. In northeastern Ohio, Dominion East Ohio's recent auction yielded a price of 12 cents per 100 cubic feet and Vectren Energy Delivery of Ohio, which is in southwest Ohio, ended at 15.5 cents.

While the Columbia Gas' auction rate is higher, Mr. Halloran said, the auction did reduce rates for those other utilities and could eventually for Columbia Gas.

"Columbia Gas had unknowns [for the bidders]," he said. "I don't think anyone wanted to come in and buy business … and find there's something wrong with that system."

Contact Jon Chavez at:

jchavez@theblade.com

or 419-724-6128.