Natural gas customers may end up paying $4.4 billion more starting next year as the industry undergoes a dramatic restructuring forced by government regulators seeking to increase competition.
Estimates on how much more per year homeowners might pay range from a low of $12 to a high of $100.Under the plan being finalized by the Federal Energy Regulatory Commission, pipeline companies will no longer buy gas; they'll simply deliver it.
The change would allow utilities and large businesses to negotiate their own deals with producers who pull the gas out of the ground, a moved designed to increase competition and lower prices for the nation's 55 million natural gas users.
But initially, the pipelines will have to pay penalties to producers for canceling their existing gas contracts, and FERC is allowing them to pass on those multibillion-dollar costs to customers.
"In January or February of this coming year, there's going to be a very loud outcry from consumers over the prices they're paying, a reaction to restructuring," predicted Bob Cave, executive director of American Public Gas Association, which represents 950 municipal gas companies.
FERC, which regulates interstate gas pipelines, estimates the restructuring will cost customers $4.4 billion. But that covers everyone - electric utilities as well as industrial, commercial and residential customers. State commissions will rule how it's to be apportioned among them.
The agency hopes to have the plan in place by Nov. 1.
Vern Margard, a lawyer with the Office of Consumers Counsel, a state agency in Ohio that represents residential utility customers, estimates the tab for average homeowners will be an extra $100 a year.
"Substantial price increases are an absolute certainty for the next several years," he said.
But the Interstate Natural Gas Association of America, an industry group, disputes that estimate, saying that the cost will average $12 a year per homeowner for three years.
Already there's concern on Capitol Hill, where Democratic Reps. Eric Fingerhut of Ohio and Jim Cooper of Tennessee are circulating a draft resolution urging a suspension of the restructuring.
FERC "has failed to conduct an analysis of the economic impact," the resolution says.
The General Accounting Office is looking into the matter, and Fingerhut, Cooper and some other members of Congress want restruc-tur-ing halted until they've had a chance to study how much homeowners will pay.
Residential customers consume about a third of the gas in the country, "so it's reasonable to assume that they'll pay about a third of the costs of transition," says R. Skip Horvath, vice president of rate and policy analysis at INGAA.
Margard disagreed.
"Residential customers will pick up the bulk of the costs - exactly how much, we don't know - but it certainly will be more than a third," he said.
While there'll be short-term pain, consumers ultimately will fare well under restructuring, said Bruce Henning, chief economist for the American Gas Association, which represents 250 gas distribution and pipeline companies.
Since they'll no longer be buying gas from pipelines, local distribution companies can "go out and make the best deal possible," Henning said.
The Plain Dealer in Cleveland reported June 25 about concern among consumer groups over the restructuring plan.
The groups fear that Columbia Gas Transmission Corp. will try to push bankruptcy costs unfairly onto residential customers in Ohio. The company has filed for reorganization under Chapter 11 of the federal Bankruptcy Code, and it faces $11.3 billion in claims from natural gas producers.
Under restructuring, customers could end up paying for more than 4,000 canceled gas contracts that Columbia Gas Transmission holds, the consumer groups say.
The transmission company flatly rejects that assertion.
As in all bankruptcy reorganization cases, the claims have been "inflated," certainly will be reduced by the court and "we don't expect our customers to ever have to pay anything approaching that number," said Columbia Transmission spokesman Dave Dodrill.