Natural gas plants could burn money
10:59 PM 6/10/03
Judy Newman Business reporter

With warnings from federal officials that tight natural gas supplies and soaring prices will persist nationwide, a report being released today shows that using natural gas instead of coal to fuel three proposed power plants in Oak Creek could boost heating costs in Wisconsin by 20 to 40 percent a year over the next 20 years.

The study by Management Information Services, a Washington, D.C., economic consultant group, says that each day the power plants would burn as much natural gas as 3,100 Wisconsin homes use in a year.

As a result of the added pressure on supplies, the average Wisconsin household could be paying another $250 to $400 a year for heat by 2010, or as much as $500 to $700 more by 2020, the study says.

Natural gas supplies are shrinking. "There is a supply problem," said Robert Wendling, senior economist and vice president of Management Information Services. "Worldwide, there's only about a 50-year reserve margin for natural gas to begin with, and there's certainly going to be a crunch."

The study was conducted for Americans for Balanced Energy Choices, an Alexandria, Va., group promoting a balanced energy policy, with offices in 13 states including Wisconsin.

Several natural gas-fired power plants already are proposed in the state, including a 450 megawatt Madison facility planned by Madison Gas and Electric Co. and UW-Madison in the 600 block of Walnut street.

Opponents of the coal-fired generators in Oak Creek, proposed by Wisconsin Energy Corp. of Milwaukee, say the 1,800 megawatt facility should instead use natural gas, which produces less air pollution.

The study's cost estimates are "probably little more than a scare tactic," said Marc Looze, clean air campaign director for Clean Wisconsin, a Madison environmental group that's part of the coalition RESET, or Responsible Energy for Southeastern Wisconsin's Tomorrow.

"What we have to look at is what is the cleanest and most economical, most efficient way of keeping the lights on in the next 20 to 40 years," while breaking the dependence on fossil fuels, Looze said. "Natural gas is a good choice in the short-term."

Tight supplies and an increasing demand for natural gas to fuel power plants nationwide already are hiking gas costs.

Federal Reserve Board chairman Alan Greenspan told the House Energy and Commerce Committee on Tuesday that natural gas prices are twice as high as they were last year at this time, while the U.S. Energy Department has said gas supplies in storage are 38 percent below last year's levels.

The spot price on Monday for natural gas was $6.25 per 1,000 cubic feet; last year's average price was about $3 per 1,000 cubic feet and that was 50 cents to $1 higher than historic rates.

"We are not apt to return to earlier periods of relative abundance and low prices anytime soon," Greenspan said.

In Wisconsin, natural gas prices will likely hold at this higher level through the end of the year, if not longer, said Donna Holznecht, acting administrator of the state Public Service Commission's natural gas division.

"Our utilities in Wisconsin do have their levels of storage right where they're supposed to be," Holznecht said. But on a typical winter day, Wisconsin utilities use gas from the open market for part of their supply, so a nationwide shortage will hike gas prices here as well, she said.

"How much it's going to go up is anybody's guess," Holznecht added.

Meanwhile, high fuel prices have forced one-fifth of the fertilizer industry's production capacity to shut down, said Robert Liuzzi, president of CF Industries, a group of regional farm supply cooperatives based in Long Grove, Ill.

"This situation threatens to destroy an efficient U.S. industry and displace thousands of workers," Liuzzi said.

The Associated Press contributed to this report.