Heating Bills To Be Budget Burden

Energy Department Estimates Big Increases For Gas, Oil Users

(AP) 
This winter, Wolfe expects more than a million additional applicants for the government program, a 20 percent increase over last year, with not enough money to go around. Congress provided $2.2 billion for the program, known as LIHEAP, last year. Wolfe said $5.1 billion is needed to keep pace this coming winter with the soaring energy costs and expanded demand.

With federal funding levels uncertain, many states are scrambling to fill in the gap as best they can, Wolfe said. He and other advocates are urging Congress to approve the additional money as part of the recovery efforts from hurricanes Katrina and Rita.

The double punch of the two hurricanes knocked out 20 percent of the nation's natural gas production, severely damaged gas processing facilities along the Gulf Coast and shut down more than a dozen refineries. As a result, natural gas supplies and heating oil are tight as functioning refineries focused on getting enough gasoline onto the market — and not building up stocks of heating oil.

Demand for heating oil increased after a report Tuesday from Accuweather.com projecting a "colder-than-normal" winter over the Northeast where most heating oil is used. Fuel oil and natural gas prices increased sharply on the New York Mercantile Exchange.

"We are confident that natural gas supplies will be adequate this winter," Paul Wilkinson, vice president for policy analysis at the American Gas Association, said at a news conference previewing the upcoming winter heating situation.

The AGA represents the country's natural gas utilities.

Wilkinson said the amount of gas in storage by the end of this month, the beginning of the winter heating season, will be above the five-year average, and while the pace of recovery from the hurricanes remains uncertain, more production from the stricken region is expected into the winter.

But the gas utilities put in storage is expensive, much of it bought last summer at prices at or near $9 a thousand cubic feet, compared with $6 last winter. Prices have spiked to as much as $14 a thousand cubic feet since the hurricanes and are expected to be in the $11 range in the months ahead.

Utilities try to cushion consumers from the volatile price spikes by buying much of their gas in summer and putting it in storage, using hedging mechanisms in the commodity markets and providing consumers with balanced billing plans over a 12-month period, says Roger Cooper, AGA vice president.

But this year "we've plucked the low level fruit" in using such tactics and more of the wholesale fuel costs will have to be passed on, he said.

Heating costs for the average family using fuel oil in the Northeast is projected by the group to be as much as $1,867 for the winter heating season, an increase of $605 over last winter, and $915 more than two years ago.

About half of all households in New England use fuel oil.

In the Midwest, where natural gas heats 79 percent of all homes, according to AGA, the winter heating costs are projected to soar to $1,568 for the season, an increase of $611 over last winter, according to Wolfe.