Portland, Oregon (Platts)--21Jul2008

New England's natural gas supply will almost certainly be squeezed this
winter if customers seeking to avoid skyrocketing heating oil costs turn
either to gas or electricity to heat their homes, state officials and an
energy economist warned.

Requests to convert homes from fuel oil to gas heat are reaching record
numbers as heating oil prices surge to new highs, officials told the National
Association of Regulatory Utility Commissioners' gas committee in Portland,
Oregon, on Sunday.

And residents who choose to rely on electric space heaters will feel the
pinch as well given that most of the electricity consumed in the region is
generated by gas, which also is expected to cost more than ever this winter.

"You are screwed up there. Your region is too dependent on natural
gas...to generate power, Ken Costello, director of natural gas policy for the
National Regulatory Research Institute, told New England regulators.

Costello's remarks came in reaction to an assessment given by Robert
Keating, a member of the Massachusetts Department of Public Utilities, who
noted that many Massachusetts residents still rely on heating oil in the
winter.

With heating oil expected to sell for about $6.50/gallon this winter, it
will cost $1,300 to fill up a 200-gallon tank, Keating said, adding that oil
distributors will demand payment up-front.

Massachusetts forbids utilities from shutting off gas or electricity to
low-income customers between November and mid-April, while the state does not
afford consumers of heating oil the same protection, he noted.

As a result, Keating said many low-income people will buy and use
electric space heaters and "that concerns me" because it will put even more
pressure on electric utilities to acquire power, Keating explained. Utilities
in Massachusetts are not allowed to own power plants and must buy electricity
from independent producers.

He noted that 40% of the power in Massachusetts comes from generators
fueled by gas, and he said an increase in electric use for winter heating will
further strain already tight gas supplies in the region.

Thomas Dvorsky, director of the Office of Electric, Gas and Water at the
New York State Public Service Commission, noted that there had been a record
number of requests for conversions this year in his state as well. But he said
many people who want gas service live in rural areas where it "is not an
option."

As a result, they face the prospect of paying record high prices for fuel
oil and propane, he said.

--Rodney White, rodney_white@platts.com