Prepare to be shocked by heating bills

Consumers already pinched by high gasoline prices could soon feel the pain of another energy spike -- natural gas.

Xcel Energy and CenterPoint Energy are warning customers that their natural gas bills could be 30 to 50 percent higher this winter now that a glut of stored-up gas has been sold off.

Price increases are already being seen by those on budget plans that spread their costs over the year, because they essentially buy their natural gas in advance.

Gilbert Tornes of south Minneapolis got a 75 percent increase in his natural gas bill from CenterPoint Energy.

"I was expecting an increase, but I wasn't expecting to get popped like this," said Tornes, who is retired and on a monthly budget plan.

"I don't know what more I could do to conserve gas. We already turn the winter temperature down to 64 at night and have it set at 68 during day, or maybe 70 if we're feeling a little bit cold."

He won't be the only person who is surprised by higher gas prices this winter, although many customers' increases won't be that steep, say Xcel and CenterPoint, the two big natural gas companies serving the metro area.

CenterPoint said customers who aren't on a budget plan can expect 35 to 45 percent price increases this winter. CenterPoint operates in six states, including Minnesota, where it has 790,000 natural gas customers.

CenterPoint customers like Tornes, who are on a monthly budget plan and still owe money for last winter because of the exceptional cold, can expect 60 to 80 percent increases in their monthly bills due in September, said spokeswoman Becca Virden. The utility is calling thousands of customers to explain why the bills for this year's budget plan are so high, she said. The bills will be reevaluated in six months to see whether they should be lowered, based on actual rather than projected gas prices.

Some hope for relief

Some analysts see an outside chance that the slack economy and a general decline in energy prices could combine to cut the price of natural gas back to last year's levels.

Natural gas prices have dropped recently after posting a 60 percent increase since the beginning of the year. The decline accelerated after Federal Reserve Chairman Ben Bernanke said last week that the economy was in worse shape than expected.

They base that on natural gas futures contracts, which are publicly traded contracts for future deliveries of natural gas, based on estimates of what the price will be at that time. (The budget bill Tornes receives from CenterPoint also is based on futures contract prices.)

The July futures contract price for natural gas to be delivered in January is slightly over $10.50 for a million BTU (British thermal units) of energy -- about 46 percent higher than last January's actual price. That's a strong indication that consumers will see big price increases this winter, said Jeff LeMunyon, an energy consultant with Linwood Capital in Edina.

If natural gas prices decline significantly by early September, when natural gas prices get locked in for the winter, consumers might be saved from a price shock.

More factors in play

But several unknowns could affect futures prices for natural gas:

• If the economy worsens, less natural gas might be burned by industry and, as a result, prices could go down.

• It's hurricane season in the Gulf of Mexico. If storms disrupt natural gas production there, then gas prices could rise because supplies would be lowered.

• There is less natural gas in storage than last year. That oversupply helped keep natural gas prices low last winter, but tighter supplies this year could tend to keep prices high.

That said, analysts lean toward higher natural gas prices.

"The only thing that's going to drive down natural gas prices before winter will be a drop in crude oil prices and the expectation of a softening economy," predicted LeMunyon, the consultant in Edina.

"A 50 percent increase in natural gas prices is absolutely possible," said Darin Newsom, an analyst for DTN, an Omaha firm that tracks the prices of commodities such as natural gas.

"If oil were to fall to $100 a barrel [from about $130 today], you could see natural gas fall to $7 to $9 in January," compared with $7.17 in January 2008, Newsom said. "But you'd need to see $100-a-barrel oil by September."