by Phil Keren
Cuyahoga Falls
News-Press Editor
Silver Lake -- The village's mayor said he and two other local leaders hope that the price of natural gas will drop soon in the communities' aggregation program for that utility.
Silver Lake is in a gas aggregation program with Stow and Munroe Falls. Vectren Source serves as the gas supplier in the program.
Silver Lake Mayor Bernie Hovey said a price of $12.98 per one thousand cubic feet [mcf] was recently established for May gas flow and a June billing for people who participate in the aggregation program. That was up from a rate of $10.93 per mcf rate that residents paid in April.
"The prices are completely out of control," said Hovey at the Silver Lake Village Council meeting May 5.
On the advice of a representative from Independent Energy Consultants, Hovey said he, and Stow and Munroe Falls officials agreed to "ride this out" and will strike a price later this month for the June gas flow.
For the June rate, Hovey told Record Publishing Co. "We will wait until what they [the consultants] think is the most optimal time ... we can go right up until the last day of the month. What we're hoping is that there is a turnaround in the prices and they start dropping."
Mark Burns, the president of Independent Energy Consultants (which is providing guidance and advice to the three communities in the gas program), said a pricing formula was negotiated with Vectren to let rates float with the market on a monthly basis, or to lock in a rate when the price becomes favorable.
"While it is always our preference to set fixed pricing when market conditions are favorable, no one sees this as a good buying opportunity," said Burns. "We are entering the summer months when natural gas consumption is extremely low for residential customers and the impact of high rates is diminished. We will instruct Vectren Source to purchase some or all of the community's summer gas needs when the market prices decline. Until then, residents should expect variable prices that change each month."
Burns explained the new gas program started in April "during the midst of a dramatic run-up in natural gas prices."
"Natural gas prices are following the lead of crude oil and both are up approximately 50 percent for the year," said Burns.
Burns added the increase in prices "is coming from speculators shifting large amounts of money from stocks into virtually all of the commodities (grains, metals, energy, food, etc.). When that happens our entire economy struggles and we're seeing it in lost jobs, and feeling it every time we visit the grocery store or fill up at the gas pumps."
Burns also noted the declining value of the U.S. dollar plays an important role in the rising prices.
"The U.S. dollar has also declined to about 70 cents when compared to foreign currencies," said Burns. "Since we import 67 percent of our crude oil, that is contributing to much of the increase."
Burns explained "the natural gas market fundamentals of supply, demand, and inventory storage do not support these high prices," and noted the U.S. Department of Energy has forecasted wholesale gas prices at $8, but noted the current rate "is closer to $11-$12/[one million BTUs of energy]."
Burns said he thinks "we are already seeing an economic slowdown that should limit demand and moderate prices."
"We've also seen some of the non-energy commodities recently give back much of their huge gains," said Burns. "If the U.S. dollar begins to strengthen and the speculative money dries up, we should see a return to prices that are driven by my normal supply/demand conditions."
He added that prices typically drop from June through September, "particularly after winters as cold as last year."
However, Burns said factors like a continued increase in crude oil prices, a "prolonged" heat wave in the summer, more environmental laws which steer electric producers away from coal and toward natural gas, and hurricanes in the Gulf of Mexico in the fall could push the prices even higher.
Hovey said there are 547 active customers in Silver Lake with the Vectren Source program. Burns said there are more than 9,400 households from the three communities that are participating in the community. There are 7,190 Stow customers and 1,279 Munroe Falls customers in the program.
"Anybody can leave [the gas aggregation plan] any time they want with no penalty," said Hovey.
E-mail: pkeren@recordpub.com
Phone: 330-686-3940