Natural Gas Prices Surge As Temperatures Plummet

HARTFORD, Conn. (CBSNewYork/AP) - The newest wave of cold air helped to deplete fuel supplies and send prices for propane and natural gas to record highs. Higher natural gas prices also are leading to sharply higher wholesale electricity prices as power utilities snap up gas at almost any price to run power plants to meet higher-than-normal winter demand.

Homeowners who use natural gas and electricity will see higher heating bills because they'll use more fuel. But prices won't rise dramatically because utilities buy only a small portion of the fuel at the elevated prices.

As WCBS 880 Connecticut Bureau Chief Fran Schneidau reported, natural gas is the premium commodity these days in the northeast.

Energy consultant Gene Gilford explained most of the electricity in the region is generated by natural gas. He added supply is not limited.

"The northeast does not have a lot of long distance pipelines to bring that gas from where it's produced to the markets where it's needed," he told Schneidau.

Utilities in the northeast have created a kind of bidding war, driving natural gas prices up, said Gilford.

"Utilities have to run their power plants to generate electricity 24 hours a day, seven days a week, 365 days a year. And they will pay anything to get the fuel in order to keep the lights on," he said.

Gilford added he expects prices to stabilize once gas pipelines expand in the northeast.

On Tuesday, prices for natural gas for immediate delivery averaged $120 per thousand cubic feet in the Northeast, a record, according to Samantha Santa Maria, managing editor for North American natural gas at Platts. By comparison the futures price, for delivery a month from now, finished the day at $4.43 per thousand cubic feet.

"We've seen record high prices from New York to the Carolinas," she said.

Santa Maria said the prices are being driven higher by power generators desperate to make sure they have enough gas to run power plants — and not because supplies in the U.S. are particularly tight. "We think a lot of this is fear factor," she said.

Natural gas is the most-used fuel for heating - the Energy Department says 58.6 million households rely on natural gas. It is the second-most used fuel to generate electricity, after coal, but because of the way power is priced, the price of natural gas-powered electricity often sets the wholesale price for all electricity in a given region.

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