ARTICLE

Iowa consumers benefit from lower natural gas prices

Glut brings prices to 15-year-low

A rare glut of natural gas has brought savings — and some disbelief — for Iowans and their utilities.

The price of natural gas is at a 15-year low due mainly to increased natural gas production and high levels of gas in storage due to last winter’s mild temperatures, according to Black Hills Energy spokesman Curt Floerchinger.

The improved supply is mainly due to expanded drilling of natural gas wells in shale formations that did not yield commercially viable rates of natural gas until new technologies arrived on the scene over the last 15 years. They include the controversial practice known as hydraulic fracturing or “fracking” in which pressurized fluids are injected into deep underground wells to induce the release of natural gas, and horizontal drilling.

Annual household savings from lower natural gas prices will increase disposable household incomes by an annual average of $926 per year from 2012 through 2015, according to IHS Global Insight, a Denver-based international research and information company.

Residential natural gas bills in Iowa have definitely been smaller over the last year or two:

  •  At MidAmerican Energy, those bills were down an average of 22 percent last winter from the previous winter due to a combination of low natural gas prices and mild weather, spokesman Tim Grabinski said. MidAmerican provides natural gas service in both the Iowa City and Cedar Rapids metro areas.
  • Alliant customers are paying about $1.03 per therm for natural gas, compared to $1.19 in 2005, even after a recent interim rate increase. The increase is part of a natural gas rate case to cover rising costs of operating Alliant’s natural gas distribution system and doesn’t stem from the price of natural gas. Alliant provides natural gas service to many smaller area communities including Washington, Lone Tree, Newhall, Shellsburg, and Walford.
  • Black Hills Energy customers now pay about 28 percent less for natural gas than a year ago, Floerchinger said. The utility expects prices to remain in the same range for the next two years. South Dakota-based Black Hills’ Iowa service territory includes Dubuque and Manchester.

It all seems a little too good to be true, in an era when crude oil prices — which often move in tandem with natural gas prices — are around $100 per barrel. That’s exactly what some consumer watchdogs think.

“Everybody will move to natural gas, and supplies will go down — then prices will rise,” worried Jerry McKim, coordinator of Iowa’s Low Income Home Energy Assistance Program.

Indeed, utilities like MidAmerican and Black Hills don’t see any signs that consumers are increasing their use of natural gas.

One way consumers could benefit from the price trend is to switch from electric appliances like water heaters, dryers, refrigerators — even air conditioners — to natural gas versions. They may be able to reduce emissions and fuel costs by switching to compressed natural gas vehicles in some areas of the state.

NatGas Services, a company based in Ankeny, opened the state’s first public compressed natural gas fueling station in Grimes in conjunction with Black Hills Energy, and more locations are expected.

What has benefitted consumers are lower electric rates that result from utilities obtaining more electricity from power plants that use natural gas as fuel.

The average monthly bill for an Alliant customer using 600 kilowatt hours of electricity in Iowa fell from $92 in to 2010 to $85 in 2011 and $82 in 2012, due partly to lower power generation and purchase costs. The lower rates are also due to more use of power from the company’s new Whispering Willow Wind farm, spokesman Scott Drzycimski said.

Utilities like Alliant are also switching more older coal-fired power units to natural gas to comply with clean air regulations and prepare for expected regulation of carbon emissions. For the first time in many years, state rail transportation officials are seeing a decline in coal shipments into the state.

But there’s a dark side to the natural gas boom in the eyes of Jeremy Symons, a National Wildlife Federation leader who spoke last week in Cedar Rapids.

Symons sees the new natural gas extraction technologies as a potential, and in some cases demonstrated, source of groundwater contamination. He said the natural gas industry won’t reveal what chemicals it is pumping into the shale formations to improve natural gas extraction, and federal regulations don’t require the information to be made public.

“We really want better safeguards for drinking water protection and wildlife habitat — how it’s drilled, and where it’s drilled,” Symons said before a speech at the Iowa Renewable Energy Association Expo in Cedar Rapids.

Lower natural gas prices also worry McKim, the state’s Low Income Home Energy Assistance Program administrator, because they’ll likely be used by Congress as justification to cut heating assistance funding.

The need so far outstrips demand that McKim said any foreseeable funding scenario will still be inadequate to meet the needs of low-income households.

 

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