Published: November 22, 2008 10:59 pm      

Energy cost crunch

Consumers unsure how to handle fuel price increases

Consumers around the country have struggled with rising energy prices for the past few years. But with the current waning economy, local residents and business owners are starting to panic as they face high-percentage increases heading into the winter months.

Customers of Logansport Municipal Utilities and Northern Indiana Public Service Co. can expect increases in fuel prices to be reflected on their monthly statements.

Officials for both say the cost of heating fuels is something they can’t control, but are forced to pass on to customers.

Both also point out they are not increasing rates.

“A rate increase is something that is assessed and stays on a bill, but is still money you have to pay,” said Paul Hartman, utilities superintendent at LMU. “A fuel cost adjustment is something that you have to pay as well, but it’s something that’s done every three months, and we don’t adjust the rates every three months. The electric rate we have is our base rate and is something we can control. Fuel cost is something we can’t control.”

Hartman had previously projected the maximum adjustment would be 37 percent. He now believes that figure will be lower, possibly in the range of 25 to 26 percent for the first quarter. He said expects the adjustment for the second quarter to be back down to current levels.

Hartman said the increase is because of the rise in the cost of coal. LMU recently secured a price of $136 per ton for stoker coal for 2009, a 120 percent increase from the $61.80 per ton price in 2008.

The price is also considerably higher than the current price of coal on the commodities market. Hartman says that coal is of a lesser size and quality than the stoker coal LMU uses at its generating plant. He added that the price of the coal LMU uses, which is becoming harder to come by, has not dropped significantly in recent weeks as have the prices for other coal types.

Natural gas prices have also increased, and Nick Meyer, a manager for NIPSCO communications, said customers could expect an increase of between 10 and 20 percent on their monthly bills.

Though still a sizable increase, Meyer said NIPSCO had previously projected increases around 40 to 50 percent.

Like with coal, the increase will come from a jump in the cost of natural gas, something Meyer said NIPSCO can’t control. He said an average residence will spend about $906 on heating bills during the winter heating season, up from an average of $756 last year.

“Gas cost is something that’s based upon what’s going on with the commodity natural gas in the marketplace,” said Meyer.

Meyer said natural gas prices reached a peak in July, which is usually the time when prices are at their lowest. That was the same time that NIPSCO, as well as many other gas companies, bought natural gas supplies for the heating season.

Though prices have dropped since July, NIPSCO already has a reserve of natural gas that it purchased at the higher prices, and that increase will be reflected in customers’ bills.

Hartman said LMU was doing all it could to help ease the price increases it had to pass on to customers. Though the price for stoker coal is still significantly higher than what it has been in the past, Hartman said LMU had been able to make some efficiency adjustments at its generating plant to cut down on the amount of coal the plant had to burn.

“Everyone is concerned about the increase, and we’re looking at ways to minimize the amount of coal we burn to lessen the impact of the increase,” Hartman said. He added that LMU was looking into the possibility of burning other types of coal and even biomass to help reduce LMU’s input costs.

“Of the situations we can control, we do a good job,” Hartman said. “The coal is something we’re looking to diversify and get away from the one size and quality so we have more choices to choose from.”

Though LMU’s actions could benefit customers in the future, many are uncertain how they can afford the increases they’re facing now.

In addition to homeowners, businesses who have been hit hard by the recent fiscal downturn are struggling to deal with yet another drain on their profits.

“Any increase that goes to the bottom line in today’s economy is painful,” said Skip Kuker, president of the Logansport-Cass County Economic Development Foundation.

Many local business owners and managers have turned to Kuker’s office to look for help in dealing with the increases. Though most businesses budgeted for moderate increases, like those customers have seen in the last few years, few were expecting these kinds of price jumps.

Brad Angle, the plant manager for Logansport operations at Federal Mogul, said he expected the plant’s total energy expenditures for 2009 to increase $400,000 to $500,000 over last year.

“Basically, we’re challenged to offset any increase with production improvements in the plant,” Angle said. “That’s the challenge for 2009.”

Angle said the company would try to reduce spending to make up for the increase in energy costs, but he said he did not expect that to mean layoffs.

Additionally, Angle said the company was looking at ways to increase efficiency to cut down on energy expenditures.

Kuker suggests businesses consider energy audits to determine what they can do to cut back on their usage. Hartman says LMU is willing to conduct energy audits to help companies save money.

“We’re starting on a path of energy efficiency programs where we go into a facility and do an audit,” he said. “Hopefully we can change their demand so their bills to us go down.”

Though NIPSCO does not perform energy audits, Meyer says the company can help customers, especially homeowners, through state and federal assistance programs. NIPSCO also offers rebates to customers looking to install energy-efficient appliances.

Kuker says his office can also recommend grants businesses can apply for to offset some of their energy costs and help sustain their profits in the current economy.

“That’s the thing I think has surprised everyone is that the general economy has not come out of its malaise and doldrums yet,” said Kuker. “... The bottom line is stretched as far as it can be because of the economy. If you add on any increase in fuel for delivery trucks or energy, that hurts.”

Carla Knapp can be contacted at (574) 732-5150 or via e-mail at carla.knapp@pharostribune.com