News Column

Long-Term Contracts Help Protect Residents Against Soaring Natural Gas Commodity Prices; However, Conserving Energy Encouraged

February 10, 2014



LONG BEACH, Calif., Feb. 10 -- The city of Long Beach issued the following news release:

A long-term natural-gas purchasing strategy is helping to protect Long Beach Gas and Oil (LBGO) customers from recent price spikes of nearly 300 percent, due to short supply and extremely cold weather elsewhere in the United States.

Natural commodity prices have spiked due to a combination of high demand for natural gas during extremely cold weather elsewhere in the country, and the fact that the nation's storage levels of natural gas closed the month of January at a 10-year low. The natural gas commodity price at the California/Arizona border (which largely sets the price index for Southern California supplies) last week soared to a price of nearly $2.00 per therm. The natural gas commodity price that LBGO customers will see on their February bills will be approximately $0.50 per therm, a price about 75 percent lower than last week's market price.

This favorable pricing for LBGO's customers is due to LBGO having in place a long-term gas purchasing strategy that provides both supply and price protection during the peak winter seasons:

* LBGO has long-term gas supply contracts in place that are priced at the first-of-the-month price market index which allowed LBGO to purchase its February gas supply at a price less than one-third of last week's market price.

* LBGO sheltered its customers against high prices by having in place a price protection "insurance" agreement that limits the maximum price LBGO would pay for the bulk of its winter gas supply. This maximum price is less than half of last week's high price.

* LBGO purchases additional gas supplies during the typically lower-priced summer months and places those volumes into underground storage facilities in Southern California, for the purpose of supply reliability during the peak winter season. Beyond supply reliability, this storage gas can provide a price buffer, as it is doing this month, when this lower-priced gas is withdrawn from storage so as to avoid the need to otherwise purchase gas supply when the market price has spiked.

While LBGO has largely protected its gas customers from extreme price swings, increasing gas market prices will still impact gas bills. Therefore, LBGO strongly encourages its customers to take steps to lower their natural gas consumption with the following suggestions:

* Lower your furnace thermostat by three to five degrees (health permitting)

* Limit use of non-essential gas appliances, fireplaces and spas

* Reduce your water heating usage: use less hot water, turn down the water heater thermostat or insulate your water heater

Customers are reminded to follow these important safety tips when heating their homes to reduce the risk of carbon monoxide (CO) poisoning. Symptoms of CO poisoning can include unexplained nausea, headaches, drowsiness, mental confusion and flu-like symptoms.

* Never use your oven, range or outdoor grill to heat your home because these appliances are not designed for this purpose and can emit dangerous carbon monoxide

* IInstall a CO detector or change the batteries in your CO detectors

* If you suspect that you or a loved one is suffering from CO poisoning, call 911 immediately

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Source: Targeted News Service


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