High Natural Gas Prices Signal Trouble Next Winter for Low Income Customers

Since January 2008, natural gas prices have continued to rise. Here is a chart from Apache Corp., a major independent producer of natural gas and oil, showing the price rise at Henry Hub in Louisiana. Click on the chart to enlarge it.



New York prices are even higher, due to transportation costs. This signals trouble for electricity customers this summer (see NY City Wholesale Electricity Prices May Rise 89% Due to Market Design and Higher Natural Gas Prices), and more trouble next winter for customers who heat with natural gas.

There are indications that the recent runup of natural gas prices, 57% thus far in 2008, may not recede. See Global Demand Squeezing Natural Gas Supply. Many natural gas customers are on the edge now, with large unpaid account balances built up during last winter or even previous winters that have not been paid off. If they are hit with high bills they cannot afford, and break a written payment agreement with their utility, they are subject to termination of service.

Incomes of low income households in New York have not kept pace with rising costs in recent years. See Pulling Apart in New York: An Analysis of Income Trends in New York State. The current surge in energy prices is making their energy burdens, already high, unaffordable. See The Economics of Low Income Energy Assistance in New York: No Wonder They Call Economics the "Dismal" Science.

National Grid recently filed new rates that would, if approved by the PSC, increase delivery rates by 33%, That, coupled with expected price increases for the gas, will increase energy burdens for the poor. The company proposes to reduce rates $5 per month for about 50,000 customers who receive HEAP, beginning a year from now, obviously insufficient.

Reform of the utility, public assistance, and HEAP systems for dealing with low income utility customers is necessary. To list just a few steps that should be taken

• Utilities need to adopt better low income rate programs.
• The PSC must vigilantly enforce consumer rights under HEFPA. For example, see PSC Nullifies National Grid's $1,000 "Grand Plan" Requirement for Utility Service.
• The PSC should establish performance standards that would discourage termination of service as a collection tactic. See Candle Fires: A Symptom of "Rolling Blackouts" Affecting Low-Income Households.
• The PSC should strive to set more stable and predictable rates because fragile low income household budgets cannot withstand unexpected retail price surges of the type encouraged in recent years to promote competition
  
• Additional funding for HEAP and reform of its benefit structure is needed. See PULP Urges HEAP Program Reforms.
• OTDA should update public assistance heating allowances which have not been reset since 1988
• Administrative restrictions created by OTDA for the emergency utility assistance program should be eliminated.