Federal energy regulators yesterday unanimously approved an increase in natural gas prices that will add $3 billion to natural gas bills next year.
The Federal Energy Regulatory Commission voted to let natural gas producers pass on to consumers the cost of gathering gas from wells and putting it under pressure so it can be pumped through pipelines to customers.
The action is expected to add about $12 a year--approximately 2.5 percent--to the average home heating bill next year. The increase is not expected to appear on bills until late in the spring.
After approximately two years, during which producers will recover costs built up in the two years this decision was pending, the annual cost of the measure will drop to about $1.8 billion a year.
Natural gas prices--expected to climb approximately 25 percent this year--have already made natural gas regulation a hotly contested issue, with one side proposing to decontrol prices and the other arguing for stricter controls.
Although it came at a politically inopportune time and will add fuel to the controversy's flames, yesterday's decision would have been hard to postpone, FERC general counsel Charles Moore said.
The issue has been pending since 1980, when prices were lower and the issue less sensitive. Staff work on the issue was complete in November. Delaying action would have been unfair to the producers who have already spent the money and probably also would have resulted in the commission being ordered to move, Moore said.
As controversial as gas prices have become, consumer groups had not challenged the commission's right to take such an action, Moore said.
The Consumer/Labor Energy Coalition reacted to the decision yesterday by calling it "just another attempt to administratively decontrol natural gas prices and one of the many reasons prices are increasing dramatically across the country."
What the commission did is to allow producers operating before the Natural Gas Policy Act went into effect to recover 5 cents per million BTUs (British Thermal Units) for gathering costs. Producers who broke ground after the 1978 act are allowed to recover 7 cents per million BTUs for the first mile of subsidiary pipeline required to move gas to the transmission pipeline and 2 cents a mile for up to 20 miles.
Producers of post-NGPA gas will also be allowed to recover up to 18 cents per million BTUs for compression costs. Pre-NGPA producers are already recovering compression costs, Moore said.
After the order is published in the Federal Register, producers will be able to present gathering and compression charges to pipelines, which will then incorporate those costs in "purchased gas adjustment" filings. Those filings, once approved, pass costs on to consumers.
In other actions, the commission ruled, in effect, that producers and pipelines must hash out between themselves who will pay the cost of removing liquids and liquefiables from natural gas. The liquids and liquefiables are byproducts such as butane and propane that must be removed from natural gas to make it more easily transportable or are removed because they can be sold separately.
FERC felt it was important that "gas customers will not be required to pay for costs that do not benefit them," Moore said. In some cases in which those costs have been passed on, consumers eventually may receive refunds depending on the outcome of a case pending before FERC, he indicated.