FOR IMMEDIATE RELEASE: January 12, 2004
Schumer: Natural Gas Prices Are Shooting Up In Rochester Area; Heating Costs Up 26 % Per User Over Last Winter - Could Go Higher
Average natural gas user in Monroe County will pay $128 more to heat their homes this winter than last
Monroe County is disproportionately affected because over 95 % of its residents use natural gas, while only 51 % do statewide
Schumer: Price Gouging could be the explanation, asks for comprehensive federal investigation
US Senator Charles E. Schumer today released a new report showing that home heating costs for natural gas users in the Rochester area have gone up 26% so far this winter, despite the fact that natural gas supplies are higher than last year and demand has not gone up significantly. Schumer's study found that the higher prices will cost New Yorkers in the region over $1.9 million more to heat their homes this winter, and Schumer today asked federal regulators to investigate why.
"Residents in the Rochester area are in a no-win situation when it comes to heating their homes this year," Schumer said. "If you have oil heat, you are the victim of price manipulation by the Saudis. But if you have gas heat, you're no better off. At least with oil it's the enemy we know. With natural gas prices, it's a mystery what's going on here, and we need answers now."
Natural gas prices, which have remained relatively stable over the last year, have skyrocketed since Thanksgiving with little apparent reason. Usually, price increases are related to significant cuts in supply or increases in demand. But there are approximately three trillion cubic feet of natural gas in inventories across the country, which is an increase of approximately 7% over the same time last year. Natural gas stocks – the amount of natural gas in storage – is about 3 percent higher than the five-year average for such inventories, according to the US Department of Energy.
Nevertheless, data from the New York State Public Service Commission shows that the average price paid for natural gas in the Rochester area has increased almost 26% over last year at this time. According to the US Department of Energy, the average natural gas home in New York will use 91.8 million cubic feet of natural gas from October to March this season for heating, meaning that natural gas homeowners users will pay approximately $128 more to heat their homes this year than last year. All told, Monroe County homeowners will pay over $29 million more to heat their homes with gas this year.
Natural Gas Homes- 230,558
Increased Expenditures- $29,456,044
And Schumer said that prices could still go far higher, because the prices of natural gas futures have increased much more than the price of natural gas sold to consumers in New York. Since just before Thanksgiving, natural gas prices have increased by almost 50% on the New York Mercantile Exchange, where energy companies and traders bid on large amounts of the fuel. The price of natural gas closed at $4.86 on November 25th, compared to a closing price on Friday, January 9 of $7.29. Schumer said that the rapid price increase is curious because natural gas supplies and inventories are less constricted than they have been in recent winters – but Schumer also emphasized that the price increases were in no way the fault of the New York Mercantile Exchange itself.
Several traders and analysts have suggested that trading strategies at large hedge funds and other financial firms may account for some of the run-up in prices. Some funds were thought to have made large bets in the futures markets at the beginning of this month that the price of natural gas would fall below $5 per million B.T.U.'s. Pressure by funds that made opposite bets and a scarcity of other traders in the market could have subsequently caused prices to climb.
In response to the skyrocketing natural gas costs, Schumer today asked the Chairman of the Federal Trade Commission Timothy Muris and the Chairman of the Federal Energy Regulatory Commission Pat Wood to investigate the irregularities in the natural gas markets to determine if there are any signs of market manipulation or other improper activities that would artificially raise prices for New Yorkers.
"The stability of the natural gas marketplace is vitally important to the health of our nation's economy. Severe spikes in the price of natural gas threaten our economy by placing additional residential energy cost burdens on working families," Schumer wrote.
Schumer also today said that the Senate Judiciary committee – on which he sits as a senior Democratic member – will hold hearings in January into whether improper manipulation of natural gas markets is taking place. Schumer said there is a bipartisan consensus on the Committee that it must determine once and for all if the natural gas price surges are the result of market forces or price manipulation.
Earlier this year, the Federal Energy Regulatory Commission issued a report warning that because of reduced competition in the natural gas market, there is risk of inflated prices and price manipulation by energy traders. The report stated, "evidence indicates that price manipulation has occurred in certain natural gas marketplaces and may be continuing" and warned that "it is likely that revelations of improper behavior will continue for some time." William Hederman, director of FERC's office of market oversight, wrote the report. The investigation grew out of complaints of price-gouging during California's energy crisis in 2000-2001 when electricity prices soared tenfold and unleashed rolling blackouts. The price of natural gas, which is used to fuel many utilities, also jumped a similar amount. Traders from El Paso Corp and Dynergy were charged in connection with this investigation.
Schumer was joined today by Irondequoit homeowners Gerry and Regina Kehoe, whose home heating bills have skyrocketed over the last month.