Cold Temperatures Boost Demand For Natural Gas

Prices for natural gas are rising again with much of the nation experiencing cold weather. In Ohio, utilities are asking customers to turn down thermostats to make sure there's enough gas for everyone.

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STEVE INSKEEP, HOST:

President Obama used the State of the Union speech to talk up the state of the domestic fuel industry.

(SOUNDBITE OF SPEECH)

PRESIDENT BARACK OBAMA: Today, America is closer to energy independence than we have been in decades. One of the reasons why is natural gas.

INSKEEP: Natural gas production has been expanding but the natural gas infrastructure has not always kept up with demand. Sometimes there are not enough pipelines to get the gas to customers, and that's noticeable as this winter's cold weather has boosted demand to an all-time high.

NPR's Jeff Brady reports that prices going way up in some parts of the country.

JEFF BRADY, BYLINE: Natural gas prices have been relatively low in recent years, and that's encouraged a lot of homeowners and businesses to switch to gas. With drilling booms in places like Pennsylvania and Texas boosting the country's supply, there's plenty of gas to go around. The problem is building the pipelines and other infrastructure needed to deliver it. This has led to some extreme cases where natural gas prices have been bid way up. Last week in New York, one desperate buyer was willing to pay about 25 times the typical price for gas.

Jack Weixel is an analyst at BENTEK Energy.

JACK WEIXEL: You don't have gas storage east of the Hudson River, so you are very dependent on what pipelines can deliver. And when demand outstrips what's available on the pipe, then you have price spikes.

BRADY: Weixel says more pipelines into the region would solve the problem, but cold-weather demand spikes like this happen only a few times in a year. He says it doesn't make sense to build a pipeline that costs millions or even billions of dollars for something that happens so rarely. So on those occasions, prices are bid way up by those who absolutely must have gas. Weixel says sometimes that's going to be a local utility that's required to keep the heat on.

WEIXEL: You cannot freeze grandma at any cost. You do that and you're in big trouble.

(LAUGHTER)

BRADY: That does not mean your local gas bill is going way up next month. Weixel says most utilities have long-term contracts and other ways to protect customers from volatile prices. The futures market is a better measure of how much prices went up this winter for most of us. They're about a third higher than last year.

Around the country, utilities are asking people to conserve electricity during this cold snap. And in Ohio, regulators have asked people to conserve natural gas. Matt Schilling is a spokesman for the Public Utilities Commission of Ohio.

Matt Schilling is a spokesman for the Public Utilities Commission of Ohio.

MATT SCHILLING: This warning this week is really just a precautionary measure. We really don't have expectations of there to be any large scale issues. But it's just being proactive.

BRADY: Schilling says coal plants that generate electricity have switched to natural gas in recent years. Like in the Northeast, the problem is not supply so much as getting the gas to where it's needed, when it's needed. During the cold spell in early January, one utility had problems that left a few thousand customers without gas for more than a day. State regulators are asking customers to conserve to make sure that doesn't happen again.

Schilling says the commission hopes residents will turn down their thermostats a few degrees and not use gas appliances during peak hours.

SCHILLING: Which is generally early in the morning, like 7:00 to 9:00 a.m., and then again in the mid-day from about 4:00 to 9:00 p.m., when demand for electricity is at its highest.

BRADY: And regulators say if you need extra incentive, conserving energy now will mean a lower bill next month.

Jeff Brady, NPR News.

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