Gas Company Chairman Addresses L.A.'s Increased Natural Gas Bills.

The days of cheap and plentiful natural gas are over -- at least for the foreseeable future. Prices have shot up, contributing to last summer's energy crisis and this winter's higher gas bills. To find out what caused these adverse conditions, Business Trends sat down with Edwin A. Guiles, chairman of The Gas Company and San Diego Gas and Electric.

Q: After years of inexpensive and abundant natural gas, what caused natural gas prices to skyrocket?

A. There are a number of reasons for the rise in natural gas prices: increased demand by electric generators, which are using an unprecedented amount of gas to fuel their power plants, a temporarily tight supply due to slow growth in developing new supplies in the late l990s, and a robust, energy-draining economy.

While natural gas commodity prices have risen, the transportation charge, which compensates the utility for its costs of delivering gas to its customers' meters, has actually dropped over the past year for most customers.

Q: Is this a temporary phenomenon, or will natural gas prices remain high for this winter and the foreseeable future?

A. While we can't predict what the future prices of natural gas will be, industry analysts are saying that natural gas prices will likely stay high through this winter and possibly next winter.

Q: What impact are these prices having on gas and gas-generated electricity costs for the average small business in the L.A. area?

A. Natural gas bills for some businesses, such as restaurants, schools and hotels, have increased up to 30 percent over last year's average monthly winter bill. For example, a school with an average monthly therm usage of 1,130 is seeing gas bills of nearly $200 more than last year.

Q: The San Diego and South Orange County areas have experienced a serious energy crisis with a large increase in electricity costs, forcing some businesses to close. Did the cost of natural gas play any part in that energy crisis? If so, what's being done to ensure the Los Angeles area doesn't suffer the same fate?

A. The entire state of California experienced an energy crisis this year. Significantly higher natural gas prices added to the cost of natural gas-fired electricity generation. But, more importantly, the wholesale electricity market is broken and is not workably competitive. The market needs to be fixed at the federal level, and in fact, the Federal Energy Regulatory Commission (FERC) has launched an investigation of electric rates and structure of California's Independent System Operator (ISO) and Power Exchange (PX).

Q: What is the natural gas industry doing to meet the increased demand for energy?

A. Locally, The Gas Company expects to meet the increased demand for natural gas. Our extensive natural gas distribution network combined with our underground storage capabilities makes us confident that we will be able to meet the peak winter demand.

Unlike the electric market, we believe the natural gas market is workably competitive. However, we are proposing several solutions to help meet increased demand. These include encouraging more exploration by producers to increase supply, the development of a well-integrated, comprehensive national energy policy and the alignment of the nation's energy policy to ensure the natural gas pipeline infrastructure is adequate to support the development of new, much needed gas-fired power plants.

Q: What steps can businesses take to reduce their natural gas costs?

A. The best way for businesses to reduce their natural gas costs is to increase energy efficiency. The Gas Company offers plenty of options, such as free energy audits, incentives for insulation of pipes carrying hot water and steam, and incentives for replacing current equipment with more energy efficient models. We encourage our business customers to call us at [phone] or visit our Web site at www.socalgas.com for information on programs and services available to them.