By GEORGE PROVENZANO Illinois utilities surveyed
Natural gas — supplies are ILLINOIS GAS utilities will have plenty of gas to keep residential customers warm and to avoid major industrial shutdowns during the coming winter season, according to representatives of the state's largest gas distribution companies. As an additional piece of good news, company officials also indicated that although gas prices for residential service will generally continue to increase through the winter, the rate of increase will be somewhat lower than it was a year ago. In a mid-October telephone survey, representatives of Northern Illinois Gas Company, People's Gas, Light and Coke Company, North Shore Gas Company, Illinois Power Company, Central Illinois Light Company, Central Illinois Public Service Company, and Iowa-Illinois Gas and Electric Company stated that they have sufficient supplies of gas to meet all of their "firm" customers' needs in the coming heating season even if the winter of 1978-79 turns out to be more bone-chilling than last winter, which was the second coldest on record. In the event that this winter turns out to be colder than normal, the gas utilities anticipate having to reduce service only for "interruptible" customers. This group consists of a small number of industrial users who purchase interruptible service for activities which typically use gas interchangeably with other fuels. Gas prices For most Illinois residential users, gas prices will increase by 15 to 20 per cent this winter, down from the 20 to 25 per cent increases of last winter, because current purchased gas adjustments (PGA) are running somewhat lower than they did a year ago. PGAs refer to the increases in retail prices that utilities can pass along for their customers as a result of having to pay higher wholesale prices for gas purchased from interstate pipeline companies.
In addition, because of increased domestic natural gas production during 1978, Illinois utilities anticipate having to purchase smaller volumes of synthetic natural gas (SNG) this winter. SNG is made from naphtha and other liquid petroleum feedstocks and currently costs the utilities about twice as much as natural gas. Illinois utilities are confident they will meet this winter's demands for several reasons. Company representatives indicated that they are receiving increased natural gas supplies from the interstate pipelines; they have also met underground storage inventory targets for this winter; and they have the ability to produce large volumes of SNG if it is needed. In addition, gas consumers continue to reduce demands through conservation and substitution. With respect to supplies, the utilities that were contacted said they are currently receiving pipeline deliveries that are equal to or greater than the volumes which were delivered last year at this time. The increases range in size and in type from the slightly larger deliveries that Peoples Gas, Light and Coke will receive only during the coming winter months to a very large 8.5 per cent increase in long-term entitled supplies that Central Illinois Light Company (C1LCO) will receive from Panhandle Eastern Company, the utility's main supplier. Central Illinois Public Service (CIPS) and Illinois Power have also received smaller net increases in entitled supplies from Panhandle and Natural Gas Pipeline Company of America, this state's two largest pipeline gas suppliers. These increases in deliveries stem from increased drilling and production both off-and on-shore in the Gulf of Mexico and in certain Rocky Mountain states. For C1PS and C1LCO, the increased supplies have made it possible to extend gas service to new customers for the first time since 1973. Underground storage In preparation for this winter's peak heating demands, the utilities have also used the larger pipeline supplies to replenish underground storage inventories which were severely depleted by last winter's heavy demands. As of November 1, which marks the beginning of the heating season, the surveyed companies had met or were within a few percentage points of meeting their underground storage targets for this year. Finally, representatives from Northern Illinois Gas and Peoples Gas, Light and Coke indicated that they have sufficient feedstock allocations to meet planned SNG production levels this winter. For the past few years these companies have augmented the state's natural gas supplies with synthetic gas produced at two large plants in the
GEORGE PROVENZANO 8/December 1978/Illinois Issues
Chicago area. All of the utilities that were contacted indicated that conservation will also be an important factor in meeting this winter's gas demands. Utility representatives reported that conservation had reduced annual gas consumption by all users by 10 to 15 per cent since the 1973 Arab Oil Embargo. Higher retail gas prices have undoubtedly played a role in encouraging gas conservation. For residential users, higher prices have been an inducement to install insulation and turn down thermostats. For industrial users, higher prices have resulted in both conservation of gas usage and shifts to other fuels. Increases in retail gas prices will continue to encourage conservation this winter, but retail prices will not rise as rapidly this year as they did last year because there were no major increases in wholesale gas prices in 1977-78. The Federal Energy Regulatory Commission (FERC) — formerly the Federal Power Commission — regulates the wholesale prices for which natural gas can be sold in interstate commerce. The last major increase in wholesale gas prices occurred in 1976 when the price at which pipelines could purchase newly developed gas was boosted from $0.52 per 1,000 cubic feet (MCF) to a maximum of $1.42 per MCF. Since then the price has escalated automatically by four cents per MCF annually. The initial impact of the 1976 wholesale price increases on retail gas prices occurred during 1977. For 1978, the upward pressures on retail gas prices have been comparable to what they were last year which means that relative price increases will be less this year than last. This point is illustrated in the table in which average revenue per MCF is used to approximate the average retail gas rates paid by residential customers with space heating. In estimating average rates for 1978-79, the difference between the 1976 and 1977 average revenues was simply added to the 1977 averages. Carter Energy Plan These estimates are only crude approximations of what residential customers will actually pay this winter. Depending on the outcome of rate cases currently before the Illinois Commerce Commission and the actual size of purchased gas adjustments, the gas rates that each utility charges may be greater or less than the estimates in the table. Unfortunately, Illinois gas users can expect this slowdown in the rate that retail gas prices are increasing to be only temporary. One part of the National Energy Act which President Carter recently signed into law calls for another major increase in wholesale gas prices to take effect beginning next year.
December 1978/Illinois Issues/9
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