Sep 22, 2008 The Dallas Morning News 
Eric Torbenson

Sep. 22, 2008 (McClatchy-Tribune Regional News delivered by Newstex) -- While wholesale natural gas and crude oil prices have fallen sharply since July, that doesn't mean your winter heating bills will do the same.

Atmos Energy (NYSE:ATO) , which delivers natural gas in North Texas, says customers should expect higher gas prices this winter. There are several reasons, but the biggest is that natural gas prices basically doubled from spring to late June, when the utility stockpiles much of its winter gas supplies.

While gas cost close to $7 per million British thermal units last winter, it'll be closer to $10 per million BTUs this year. Natural gas future prices peaked at near $13.60 per million BTUs on July 3 but have since plunged to near $7.

Plus, the last heating season was pretty mild, 22 percent warmer than the average North Texas winter, according to Atmos spokesman Rand LaVonn. That means even if we have an average winter this time, bills will probably be higher anyway.

"Weather remains the No. 1 factor in home energy costs," Mr. LaVonn said. Atmos doesn't make money on the price of gas; it profits on a state-regulated charge to deliver the gas to homes. "We'd prefer to have lower prices, but we've been telling leaders to prepare for higher costs."

If no other major hurricanes threaten natural gas production, prices may stabilize, said Brian McDermott, senior director of pricing and operations for Tradition Energy, based in Stamford, Conn. That could be good news down the road for both gas and electricity consumers in Texas, he said. "The deregulated market is working there."

Despite two big hurricanes in the Gulf of Mexico, natural gas prices have held steady or fallen. That's because a slowing economy will mean less gas use and because discoveries of gas deposits similar to North Texas' Barnett Shale suggest supplies will be plentiful for years to come.

High summer electricity rates -- also blamed on high natural gas prices -- remain fresh in the minds of many North Texans. Those rates have started to tick down as natural gas prices have fallen, but consumer advocates say the system works against rate-payers.

"We hear all the time that when rates go up that electricity companies are just passing along their increased costs," said Tim Morstad of AARP in Austin. "The opposite isn't true when natural gas prices fall -- and that's very frustrating to hear."

AARP and others say the state's deregulated power system is broken and favors no one but the electricity producers. Texans are paying more for power than consumers in other states that have left their systems regulated; deregulation advocates say that in the long run, Texas' system will pay off.

"Electricity bills are emotional for people," said John W. Fainter Jr., president and chief executive of the Association of Electric Companies of Texas Inc. in Austin, which represents many of the state's top electric companies.

Part of the frustration for consumers is that they can see the wholesale prices falling but little change in their bills. Retail electric companies are lowering their prices as wholesale prices drop, Mr. Fainter said.

The cheapest plans offered on the Public Utility Commission of Texas' electricity choice Web site, www.powertochoose .org, have dipped below 12 cents per kilowatt-hour, an improvement over the group of lowest-cost plans offered this summer that ran above 13 cents per kwh.

For most North Texans, electricity rates haven't moved much because they're locked into fixed-rate plans. TXU Energy has nearly three-quarters of its 2 million-plus customers on a fixed plan that came from its 2007 buyout. That rate rollback -- to 12.4 cents per kwh -- expires at the end of the year. TXU has the option to increase the rate up to 14.6 cents per kwh but hasn't said what it intends to do.

"We constantly monitor the wholesale markets" to set rates, said Tom Stewart of TXU Energy, the retail delivery arm of Energy Future Holdings.

Newstex ID: KRTB-0046-28226129