Kristin Goff
The Ottawa Citizen
December 8, 2000

Home heating could cost $1,600

Natural gas prices are going through the roof this winter, creating increases of $500 or $600 in the annual bills for many typical households and a $25-billion hit to Canada’s manufacturing industry.

For consumers in the Ottawa area, that translates into an expensive winter.

Only three months after its last rate increase, Enbridge Consumers Gas is close to getting a 17-per-cent increase in natural gas rates, effective Jan. 1. That new increase, which analysts feel is a virtual certainty, could add roughly $115 to annual annual heating costs — on top of increases approved in October.

In total those past and pending increases mean a typical home will cost $1,500 to $1,600 to heat this year, up from $980 last year, according to Enbridge spokesman Mike Campbell.

(The example is for a family of four in a 1,500 square foot home with a natural gas furnace and water heater.)

While Mr. Campbell says Enbridge currently has no plans to apply for any further rate increases, others suggest it almost certainly will.

“In the current environment, I think it is realistic to anticipate we’re going to get the one (increase applied) for January, and then another one hard on its heels, maybe in February,” said Tom Adams, president of Energy Probe, a Toronto consumer and environmental group.

Enbridge’s latest rate application asks for an increase of 3.65 cents to 24.4 cents per cubic metre of natural gas. But prices have climbed so quickly on commodities markets — setting records in each of the past six sessions — that prices are well above Enbridge’s latest price increase.

The January contract for natural gas hit a record $9.24 U.S. on the New York Mercantile Exchange yesterday before closing at about $8.37 U.S. per British thermal unit, or about 37 cents Cdn per cubic metre and 12.5 cents higher than Enbridge’s latest rate application.

Not all Enbridge customers will see the rate increases Jan. 1, assuming the Ontario Energy Board gives its approval. Since the deregulation of the gas industry several years ago, half of Enbridge Consumer Gas customers –about 750,000 people — have signed on with independent suppliers, whose gas is still delivered by Enbridge for consumers in the Ottawa area.

Those with long-term contracts with other suppliers might escape the pain for a while, but anyone renewing a supply contract any time soon will face a big price increase.

The pain will also spread to businesses, whose own contracted natural gas costs will be double what they paid last year, according to Jayson Myers, chief economist for the Canadian Manufacturers and Exporters Association.

“A doubling means $5 billion in added costs for manufacturers,” who may also see other prices, like electricity increases in areas where natural gas is used in generated power.

Mr. Myers argues that in today’s highly competitive global economy, Canadian companies will have to swallow those higher costs, knocking 25 per cent off the profit margins of manufacturers in Canada over a year and perhaps leading to cuts and layoffs.

“The impact is going to be felt particularly in energy intensive industries,” he said. Those include steel, paper, concrete, petrochemical, and agrifood industries, along with many smaller businesses operating on thin margins.

Natural gas prices have spiked upward on fears of a shortage this winter. Low prices, until recently, offered little incentive for producers to increase exploration or pipe-line capacity. That didn’t create major problems in the past couple of years, when winters were warmer than normal, said Mr. Adams of Energy Probe.

Prices have been rising all year but forecasts of a huge Arctic cold wave — nicknamed a Polar Pig by some analysts — increased fears that North America might face a serious shortage of natural gas.

There was some price relief on commodity trading in New York yesterday, suggesting some traders felt recent record high prices had been overdone.

Mr. Adams suggests natural gas prices could quickly fall if the weather hits a surprising warm streak.