The heat is on – your checkbook

The heat is on – your checkbook

You've gotten your December power bill, and it doesn't look pretty.

$200, $300, even upwards of $500 to keep a home warm for one month.

Take the case of Kelly Searsmith, who usually paid $158 to heat or cool her 1,500-square-foot home in Mahomet. Like many consumers, she knew in the fall that an increase was coming due to the spike in natural gas prices. She and her husband were prepared – they had even installed an insulated garage door.

But the big bill still came: In December, she discovered they owed AmerenIP $266 after her budget plan was readjusted.

Yikes.

"Is everyone going through this?" she thought. Luckily, Searsmith could afford to pay the bill, she said. "We can cover it, but what about the people who can't?"

Many of those people are calling area agencies looking for financial assistance through LIHEAP, the Low Income Home Energy Assistance Program.

"We're busy. We are swamped," said Kelly Comerford, LIHEAP assistant coordinator with the Central Illinois Economic Development Corporation, which covers Piatt, DeWitt, Menard, Mason and Logan Counties. "It's just, gas bills are horrid. People on fixed incomes don't have any idea how they're going to pay the bills."

LIHEAP helps residents pay power bills by sending direct payments to utility companies. The payment amount varies according to incomes and the number of people living in the home. Funded by the U.S. Department of Health and Human Services and the state, LIHEAP is administered by local agencies.

"We usually slow down about this time of year, but that's not happening," said Brenda McDade, LIHEAP coordinator for the Embarras River Basin Agency that serves Clark, Coles, Crawford, Cumberland, Edgar, Douglas, Jasper, Lawrence and Richland counties.

Why the higher bills?

It's not just AmerenIP customers like Searsmith who have been hit with bigger bills this winter. Illinois' other major utilities – AmerenCIPS, AmerenCILCO, Nicor Gas and Peoples Gas – all managed to beat old natural gas price records in eight to 10 months of 2005, according to the Citizens Utility Board, a state utility watchdog group.

If only it were the winter of 1995 again. Back then, gas charges ranged from 18 to 27 cents per therm. Today, gas has surpassed $1 a therm.

What is going on?

"Natural gas prices are very volatile and difficult to understand," said Chris Thomas, CUB's director of policy.

First, consumers should know the natural gas portion of a power bill is divided into several lines, mainly the customer or account charge, the delivery charge and the gas charge. An AmerenIP account charge is about $10 a month, and the delivery charge is set at 13.355 cents per therm. Those line items don't change often.

The gas charge is "the price of gas that AmerenIP pays for the gas, that we pay to suppliers," Ameren spokeswoman Natalie Hemmer said.

That's the volatile portion of the bill.

The wholesale cost of gas to suppliers is not regulated, and it's driven by supply and demand, Hemmer said.

"We do a variety of things to make sure we're getting a good price on the market," she said.

Those things include buying gas when the prices are low and storing it.

Historically, utilities have been able to buy gas in the summer and put it in storage. But in recent years, more natural gas is being used to fire up power plants, Thomas said. That means a rise in demand. As a result, summer gas prices are not as reasonable as in the past, Thomas said.

The Illinois Commerce Commission reviews utilities' gas buying strategies, but "there's more that could be done among regulators and utilities to make sure they're using best strategies possible," CUB spokesman Jim Chilsen said.

CUB is calling for the commission to draft a best practices list for the gas utilities. It would include, among other things, guidance on price hedging strategies.

What else is going on? The natural gas that central Illinoisans use is largely from the Gulf of Mexico region, Hemmer said. It's piped north through transmission lines to distribution points, through smaller pipes down streets and to individual homes. As many consumers know, production in the Gulf declined after Hurricane Katrina, which pushed market prices higher.

What to do

If you haven't already, consider signing up for budget billing. But know this: It won't reduce the amount you pay the utility.

"It's a way to even out bills," Hemmer said.

With budget billing, customers pay a set amount, estimated on the previous 12 months' usage. That monthly budget billing amount is re-evaluated on the fourth and eighth month after a customer's enrollment. In the 12th month, customers pay the set amount, plus or minus any adjusted amount. That means if you've cranked up the heat more than usual or if gas prices spiked, you can expect the bill amount to change.

Customers who went on budget billing in December 2004 or January 2005 could see a higher bill in December 2005 or January 2006 because they could be carrying an amount from the previous year, Hemmer said.

Because of higher natural gas prices and utility bills this winter, CUB has asked the Illinois Commerce Commission to adopt emergency rules that would allow customers pay a percentage of their bills, according to their income, to avoid having their power disconnected.

In the meantime, consumers should find out if they qualify for LIHEAP. Customers can call the state LIHEAP office or their local agencies and make an appointment to see a counselor. Applicants must bring documents such as Social Security cards for everyone living in the home, proof of income for all members of the household and the most recent utility bill.

If the application is approved, a one-time, lump-sum payment is sent to the utility.

If you can't pay

If you don't have enough money in your bank account to cover the winter heating bills, call Ameren. When you contact a customer service representative, have a plan of what you think you can do, Hemmer said.

If you are behind in your payments, Ameren could enroll you in a payment plan, meaning you would pay your current bill plus a certain amount each month toward that back amount, Hemmer said.

From Nov. 1 to April 1, state rules govern if a utility can shut off someone's power. Utilities only can disconnect if the temperature is above 32 degrees for 24 hours, said Beth Bosch, spokeswoman with the Illinois Commerce Commission.

"We really don't even want to see customers get to that point," Hemmer said. "They're far better off to contact us to see what can be done as opposed to putting off the inevitable," she said.

The outlook

Part of the reason gas bills were higher last month was that it was colder than in December 2004. The average temperature for December 2005 was 24.8 degrees, 4.7 degrees below normal, said Jim Angel, state climatologist with the Illinois State Water Survey.

"The first three weeks were bitterly cold, but the last week was pretty darn warm," Angel said.

The average temperature for December 2004 was 32, 2.5 degrees above normal, he said.

In addition, there were some windy days last month, days when it's hard to keep the house warm, Angel said. Dec. 8, for example, had a high temperature of 24 and a low of 9, with wind gusts of up to 27.5 mph.

On the bright side, the first few weeks of January have featured above-average temperatures, and the National Weather Service's Climate Prediction Center believes that trend will continue for the rest of the month, Angel said.

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