Hikes Natural Gas Prices Driving Up Costs for Fleets.

With the cost of natural gas skyrocketing after years of rock-bottom prices, homeowners and businesses who heat with the fuel aren't the only ones experiencing natural-gas sticker shock.

So are the public agencies and private companies who have switched to natural gas fuels to power their fleets of trucks, buses and other vehicles -- even as other Southern California fleet operators get ready to make a mandatory switch under new air quality regulations.

For the last 15 years natural gas has been sold on the cheap, going for $2 to $3 per million British thermal units on the futures markets, the equivalent of about a $12 to $18 barrel of oil.

But with the current run up that has skyrocketed to $8 per million BTUs, or about a $48 barrel of oil. And it's being felt at the pump, where its used as either Compressed Natural Gas (CNG) or Liquid Natural Gas (CNG).

The Metropolitan Transportation Authority, which has the largest clean fuels fleet in the nation with more than 1,000 CNG buses, had been paying 31 cents per therm, or per 100,000 BTUs, just last year.

But the price has hit 75 cents per therm, which will cause the agency to overshoot its $8.5 million CNG budget this fiscal year by several million dollars, said Jim Pachan, the agency's equipment maintenance manager.

"It's going to increase our (actual expenditures) a lot higher than was anticipated," said Pachan. "In the last few months the few months the increases have steepened."

Meanwhile, Waste Management, Inc., the nation's largest refuse company, which operates 50 CNG trucks in the Los Angeles region, has experienced a 40 percent spurt in the price of its natural gas fuel, said Kent Stoddard, the company's director of government affairs in the western region.

There are currently fewer than 3,500 natural gas vehicles within the South Coast Air Quality Management District, which includes most of Los Angeles County, Orange County and portions of Riverside and San Bernardino counties.

But that number is expected to jump at least five fold, as a new series of AQMD rules requiring operators of transit buses, refuse trucks, municipal and other fleets to buy only clean fuel vehicles by the kicks in over the several years.

Critics of the rules, which do not apply to private trucking fleets, are pointing to the price spikes as another reason the district should hold off on adopting its last rule in the series, a requirement that school districts switch to natural gas buses.

"There is no doubt that they are seeing the cost of natural gas going through the roof, and that is the direction that they will be forced into unless the AQMD changes things," said Scott MacDonald, a spokesman for the South Coast Clean Air Partnership, a coalition of public and private agencies, including school districts.

However, an air district official said the current price spike is probably only temporary -- not a good reason to retreat on regulations that will cut tons of diesel emissions, which are linked to cancer and other respiratory problems.

"We are of course concerned about these price spikes, but obviously natural gas prices are going to fluctuate," said Henry Hogo, the district's planning and rules manager.

Indeed, several long range forecasts indicate that the price spikes should subside in the spring, with the price settling somewhere between the current highs and the historical lows of the last decade.

And natural gas advocates note that the natural gas price spike follows a big jump in diesel costs over the 18 months. So while natural gas has lost whatever cost advantage it may have had -- a point still open to debate -- it remains competitive on a gallon equivalent basis.

Still, the price spikes have a lot of people nervous, not the least of which are natural gas fuel providers, such as the Newport Beach-based Pickens Fuel Corp., one of the region's largest natural gas fuel providers.

The company, which has many long term contracts, has been absorbing the higher cost of natural gas where it can, to cushion its customers in what is still a very nascent market. But it is banking on gas futures to drop to the $4 to $4.50 per million BTU range, a price competitive with $25 a barrel oil.

"Those rules were passed by the AQMD for a purpose, but there was an underlying assumption they would not put anybody out of business," said David Haradon, a company sales representative.