Apr 04 - Columbian

Natural gas and electricity rates will start to climb in 2009 in Clark County and could go up significantly in the years ahead, unless global trends make a surprise reversal.

It's not clear how much rates could rise, but local gas and electricity providers are beginning to worry.

"The price of natural gas is up so much in the last two months that to fill the remaining needs for 2008, we could be as much as $10 million over budget," Wayne Nelson, general manager of Clark Public Utilities, told the agency's board in March. The utility has the cash to cover costs this year, but if prices stay high it will have tough choices to make in 2009.

Meanwhile, Northwest Natural Gas Co. applied last week for a 4.8 percent general rate increase. The gas company's first proposed hike since 2003 won't be its last, Chief Executive Officer Mark Dodson said on Thursday.

"I wish I had better news," Dodson said. "We don't control the cost of the commodity. We buy it and pass it through to you at exactly the price we pay."

After holding steady at around $6.40 per thousand cubic feet through most of 2006 and 2007, natural gas in March reached $8.29 per thousand cubic feet, according to U.S. Department of Energy figures. Futures contracts for the next 12 months, which are agreements to buy the fuel in the future, average 6 percent higher than current prices, according to the federal government's Natural Gas Weekly Update, released Thursday.

Clark Public Utilities officials hope that the spike will subside.

"There has been concern that the fundamentals of the gas market really don't justify the prices that are there," said Mick Shutt, spokesman for agency that provides electricity to more than 179,000 residential and business customers throughout Clark County.

Roughly two thirds of Clark Public Utilities' electric spending goes to its natural gas-fired River Road Generating Plant. Its risk oversight committee, which hedges gas to maintain rate stability, will meet April 15 to discuss these issues, Shutt said.

"This was predictable when they decided to build River Road," said Jim Malinowski, retired Pacific Gas & Electric engineer, who foresaw rising rates long before Clark Public Utilities built its generating plant.

"It should never have been built, and we're paying for it now," Malinowski said.

We'll keep paying for it in Clark County, predicts Gregg Kantor, Northwest Natural's president and chief operating officer.

Demand from China, South America and Canada has already tightened supply and pushed up prices, Kantor said on Thursday.

Oregon and Washington laws aimed at curbing global climate change could increase the demand for natural gas still more.

"The sun doesn't shine every day, the wind doesn't blow every day," Kantor said. As a growing share of the region's electricity comes from these unreliable power sources, "You have to back up those renewables with a reliable power source like natural gas."

Northwest Natural is using the spectre of rising gas costs to advocate for two controversial proposals, both in Oregon and both aimed at increasing supply: the 210-mile Palomar Pipeline and liquefied gas import terminals along the Columbia River.

Northwest Natural has a financial stake in Palomar, which would move natural gas between the Willamette Valley and Central Oregon, Dodson said.

Opponents say the pipe would also cut through fish habitat, public forests and stands of old-growth trees.

Liquefied natural gas terminals would allow for the import of vast quantities of chilled and compressed gas from the commodity- rich Pacific Rim. Opponents fear that LNG would be dangerous and bad for the environment.

"Our customers need access to LNG," Kantor said. Though Northwest Natural is not financially backing any LNG proposals, the company could buy 20 percent of gas imported if one were approved, he said.

Malinowski, the retired utility engineer, said he's disappointed by growing demand for natural gas.

"It's a conundrum that our renewables policy may lead to the increased use of natural gas, which could lead to more pollution," Malinowski said. "We should be focusing more attention than we are on conservation."

Did you know?

Natural gas costs are up 26 percent since December, according to the U.S. Department of Energy.

Northwest Natural Gas' proposed 4.8 percent rate increase this month follows about a 10 percent rate reduction for residential and business customers last fall.

A $12 million settlement payment from the Bonneville Power Administration will give Clark Public Utilities a buffer to prevent rate hikes this year.

Cowlitz Public Utility District, which does not use gas-based power, will use its BPA settlement money for refunds averaging $55 per household.

Courtney Sherwood covers public and private utilities. Reach her at 360-735-4553 or

courtney.sherwood@columbian.com

Originally published by COURTNEY SHERWOOD Columbian staff writer.

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