Chicago Residents, Natural Gas Bills Could Rise 50 Percent 
                    Source: Knight Ridder/Tribune Business News 
                    Publication date: 2000-10-03


                    Oct. 3--Chicago residents are likely to see their
                    natural gas heating bills jump as much as 50
                    percent this season, officials with Peoples
                    Energy Corp. said Monday. 

                    Prices for natural gas are almost double what they
                    were a year ago, pushed upward as the nation's
                    booming economy makes demands on a tight
                    supply. And many electric utilities are switching
                    from coal-fired generation plants to natural gas
                    generation plants, adding to pressure on the supply.

                    Natural gas prices were about $1.85 per metric
                    thousand cubic feet at the source last year. But
                    through July of this year, the price was $3.49 per
                    mcf--an 89 percent increase. 

                    Those prices may translate to sticker shock when
                    Chicago-area consumers open their bills this winter.

                    For October 1999 through March 2000, the average
                    Peoples Energy residential customer who uses
                    natural gas for home heating and cooking paid
                    $735. This season, Peoples Energy is projecting
                    that same customer will pay $1,083, said Luis
                    Diaz-Perez, a Peoples spokesman. 

                    "We are going to continue to communicate with our
                    customers on ways to manage this winter's bill,
                    whether that be through tips on economizing at
                    home or information about payment plans and
                    financial assistance programs," Diaz-Perez said. 

                    In July, Nicor Inc. predicted that its customers,
                    located primarily in the Chicago suburbs, could see
                    their bill rise by as much as $200 over last year for
                    the same six-month period. But Nicor expects to
                    revise that prediction upward this week, said Lee
                    Haines, a spokesman for Nicor. 

                    Haines noted that the October gas cost for Nicor
                    customers is 63 cents per therm, up from 51.5
                    cents per therm for September. And the October
                    cost per therm is 70 percent higher than last year's
                    cost of 37 cents per therm, Haines said. 

                    Said Marty Cohen, executive vice president of the 
                     Citizens Utility Board in Chicago: "Most
                    consumers are unaware of what they are in for this
                    winter. They haven't taken note that gas prices are
                    dramatically higher than they were a year ago." 

                    Cohen suggested that consumers study the gas
                    companies' varied payment options to determine
                    whether spreading payments out evenly over the
                    year would make economic sense for their families. 

                    As expensive as it's likely to be to heat a
                    Chicago-area home this winter, prices are higher in
                    other areas, says Donato Eassey, first vice
                    president for natural gas research at Merrill Lynch in
                    Houston. Nationally, Eassey said, residential prices
                    for natural gas have escalated 88 percent over last
                    year. 

                    "If they are only increasing 48 percent in the
                    Chicago area, they've done a good job of keeping
                    costs down," Eassey said. 

                    Eassey also said that even if the predicted price
                    increases occur, the cost of natural gas is still
                    much lower than it has been in the past. 

                    Consumers enjoyed a significant decrease in gas
                    prices between mid-1984 and 1999, with prices on
                    average down 2 percent or 3 percent, though the
                    consumer price index stayed steady, Eassey
                    noted. 

                    "We've been spoiled by cheap energy," Eassey
                    said. "It's still the best bargain in town." 

                    But Eassey noted that rising prices appear to be
                    encouraging gas companies to push for exploration,
                    which in the long run could increase supply and
                    keep the lid on prices. 

                    When prices were low, Eassey said, "we just didn't
                    have the drill bit turning to the right often enough.
                    There was not enough incentive to invest in new
                    prospects." 

                    Last year, the number of rigs drilling for natural gas
                    was 597; now the number is up to 806, a 35 percent
                    increase, he said. 

                    Severin Borenstein, the director of the University
                    of California at Berkeley's Energy Institute, agreed
                    that high energy prices are likely to encourage
                    energy companies to look for new sources of
                    supply. 

                    "The politics are such that the higher prices are
                    going to add fuel to the debate over drilling for fossil
                    fuels in North America," especially in normally
                    sacrosanct areas such as Alaska, Borenstein said.