Key to the Citygate

Deck: 

Have gas prices fallen victim to speculation?

Fortnightly Magazine - January 1 2001
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On Thursday, Dec. 8, as natural gas hit $40 at the citygate for Southern California (prices hit $60 that Friday), I found myself in Colonial Williamsburg, a guest of Michigan State University's Institute of Public Utilities, at the group's annual conference, watching a panel of industry experts try in vain to explain what was happening.

First came David Costello, from the U.S. Energy Information Administration. He put some recent forecasts on the overhead projector, showing gas "spot" commodity prices at $6 this month and falling by January 2002 to about $4.50, give or take 75 cents. Say what? Costello shrugged and admitted that EIA had missed the mark. "The New York citygate price was about $30 yesterday," he said, adding that "yesterday's closing price on the NYMEX was more than remarkable." Does EIA have a clue? "Forget about this winter," he advised. "We're concerned about next winter."

Next up was Michael Shames, director of California's UCAN consumer advocacy group. Shames put up his own set of graphs. They showed retail gas price spikes in a virtual mirror image of recent electricity price curves. The 6.5-cent retail cap, enacted this summer in California to protect residential electricity customers against rate increases for standard-offer utility service, doesn't cover gas. "The gas price spike hasn't hit customers yet," said Shames, "but it will in a month or two. And there's no safety net, like there is for power."

That left it to Stephen Adik, senior executive vice president and chief financial officer at NiSource to offer some insight, and he didn't hold back.

"It's my firm belief," said Adik, "and you can quote me on the record on this, that today gas prices are being manipulated.

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