Survey of Illinois' gas utilities shows companies are prepared There's enough natural gas for a cold winter

ILLINOIS gas utilities appear to be in good shape for meeting space-heating demands for the winter of 1977-78. The probability of interruptions in gas service in this state appears to be minimal even if there is extended colder-than-normal weather in the coming months in Illinois, and in other parts of the U.S.

A mid-November telephone survey of the seven largest gas utilities in the state (Northern Illinois Gas Co., People's Gas, Light and Coke Co., Illinois Power Co., Central Illinois Light Co., North Shore Gas Co., Central Illinois Public Service Co. and Iowa-Illinois Gas and Electric Co.) indicated that these companies are well prepared — and in some ways better prepared than last winter — for meeting the gas demands of Illinois customers this winter. All of the companies contacted reported that available inventories of gas in underground storage are larger today than they were last year, with some companies having up to 10 per cent more gas in storage than one year ago.

Interstate curtailments
Six of the seven gas utilities also reported this year that curtailments by interstate pipelines are about the same as they were last year. Only Northern Illinois Gas expects a substantially greater curtailment from its pipeline suppliers during the 1977-78 heating season. Curtailments are reductions in gas deliveries to the utilities which are made by the pipeline companies when they are unable to obtain sufficient quantities of gas to meet contractual requirements.

Northern Illinois Gas and People's Gas, Light and Coke reported that the two synthetic natural gas (SNG) plants located near Chicago are currently operating at near capacity levels of production. These plants augment pipeline supplies of natural gas by producing SNG from naphtha and natural gas liquids. Both plants, which together are capable of supplying about 10 per cent of Illinois' annual gas demands, have received full-capacity feedstock allocations from the U.S. Department of Energy and will continue to augment underground and pipeline supplies of natural gas throughout the heating season. Under the provisions of the Emergency Petroleum Allocation Act of 1973, the Department of Energy (formerly Federal Energy Administration) must approve the use of petroleum products in making SNG (see June 1977, Illinois Issues).

In summary, with their present gas supply positions, all of the gas utilities surveyed indicated they do not anticipate having to interrupt service to their firm customers this winter under conditions in which the weather is colder than normal. Several companies further added that they do not anticipate having to interrupt service even if this winter is as bad as last winter's record cold.

Generally speaking, the prospects of having to make service interruptions during the winter are dependent primarily on the timing and duration of the cold weather. When winter weather is extremely cold early in the heating season, e.g., in October, November and December, gas utilities deplete their stored inventories more rapidly than they would under normal winter conditions. In this situation and in anticipation of prolonged below-normal cold weather, gas companies must make mid-winter adjustments, which may include interruptions in service, in order to meet potentially heavy heating demands in March and April.

lllinoisans nearly experienced this kind of heating season last winter. Through February, the winter of 1976-77 was the coldest on record, but warmer-than-normal temperatures in March and April literally melted the icy, everclimbing heating degree-day trend which had gripped the state since the previous fall.

A repeat of last winter's weather is not expected this year. Through the fall, temperatures and heating requirements have been running at about normal levels throughout the state. According to a long-range forecast issued by the National Weather Service on November 29, winter weather in the Midwest for 1977-78 is likely to be colder than normal but probably not as cold as last year.

National weather conditions
Although this information is encouraging, Illinois gas users must realize that weather conditions in other parts of the country can potentially affect gas service in this state. If cold weather induces Congress to reinstate the Natural Gas Emergency Act which expired

January 1978 / Illinois Issues/ 11

Most major pipeline companies reported they do not expect any significant industrial closedowns this winter

last summer, the Federal Energy Regulatory Commission (FERC) could order interstate pipelines to reallocate part of their scheduled deliveries to Illinois utilities to areas of the country experiencing emergency gas shortages. Large emergency diversions of this kind could affect the ability of Illinois gas companies to meet customer needs.

Fortunately, the prospects of having the federal government reallocate pipeline gas supplies this winter are not as likely as they were last winter. In September, the Federal Power Commission said that 23 of 29 major pipeline companies reported they do not expect any significant industrial closedowns this winter if the weather is normal or up to 10 per cent below normal. If the winter is 10 per cent or more colder than normal, only six pipelines — none of which supply Illinois — project significant industrial plant closings. Large industrial users are first in line to receive service interruptions during emergency gas shortage situations.

Regardless of weather conditions, Illinois gas users will find that their gas bills are likely to be increasing this winter. Natural gas pipelines have been increasing the prices at which they sell gas to utilities, and utilities are passing these increases along to their customers.

In addition, increases in rates are likely to continue for some time to come as the prices at which pipelines sell gas to utilities are still rising at an increasing rate. In 1976 the average price received by major interstate pipelines was 17.5 percent above 1975. In 1977 the average price is a whopping 35.7 per cent greater than 1976.

In 1976, residential users of natural gas in Illinois experienced a 17.3 per cent increase over 1975 in the average cost of gas service. If retail gas prices are increasing proportionately with increases in wholesale prices, Illinois residential users can expect to pay 6.5 cents more per therm this winter than last. For a home for example, that uses 200 to 230 therms per month during the peak months of a normal heating season, a rate increase of this kind would mean gas bills that are approximately $2 to $7 more per month over comparable periods last winter even though last winter's heating requirements were at record high levels.

Gas prices continue to rise because it is generally believed that producers need better incentives to explore and develop new supplies of natural gas. Under the present regulations, the Federal Energy Regulatory Corn mission (FERC) allows pipelines to purchase newly developed gas for interstate transmission at up to $1.46 per 1,000 cubic feet (MCF), a rate which is allowed to increase automatically by four cents per MCF annually. FERC is a five-member independent regulatory agency within the Department of Energy which came into existence October 1, 1977. It assumed many of the functions of the now-abolished Federal Power Commission.

National Energy Plan
As part of the National Energy Plan proposed by the Carter administration and passed by the U.S. House of Representatives, FERC would allow pipelines to purchase newly developed gas for both interstate and intrastate transmission at up to $1.75 per MCF beginning in 1978 and increasing by about 7.5 per cent annually thereafter. The U.S. Senate has passed legislation which would eventually eliminate federal regulation of the price of natural gas at the point of production and presumably allow it to be determined by the forces of supply and demand. The differences between both bills are currently being ironed-out by a House-Senate conference committee with President Carter threatening to veto any bill which deregulates the price of natural gas.

In the meantime gas users in Illinois can be reassured that in all likelihood gas supplies will be sufficient to meet their needs this winter. With that in mind, gas consumers may choose, if they wish, to forget last year's "100-year" winter weather for at least another 100 years, but they must forget last year's lower gas rates forever. 

12/ January 1978/ Illinois Issues