Natural gas bills to fall at least 10%

Massachusetts homeowners' monthly natural gas bills will drop 10 to 13 percent or more starting today, a payoff from a milder-than-expected winter and wholesale gas prices that have dropped since hurricanes ravaged the Gulf Coast in September.

State utility regulators yesterday approved new rates for eight gas utilities, including rate reductions of 10 to 10.3 percent for customers of KeySpan Energy Delivery New England, the state's biggest gas utility with more than 700,000 customers.

Under state law, gas utilities have to seek new rates whenever the cost of gas as a commodity rises or falls more than 5 percent. ''In this case, we were pleased to have it be a 5 percent move down," said KeySpan spokeswoman Carmen Fields.

''Weather is the largest determinant of price, and I hasten to add that energy prices are very volatile, and we're early in winter," Fields said. Gas rates could rise if a short-term price spike hits the market, Fields added.

For a KeySpan customer in the region formerly served by Boston Gas Co., using an average of 160 therms of gas monthly, next month's bill will drop to $272 from the previously forecast $303, according to the state Department of Telecommunications and Energy.

Bills for KeySpan customers in areas formerly served by Colonial Gas Co. units on Cape Cod and in the Merrimack Valley and Essex Gas Co. are also dropping by 10 to 10.3 percent. The utilities all operate under the KeySpan name but remain separate companies for the purpose of setting rates.

For Bay State Gas Co. customers, average bills will drop 13 percent, and Blackstone Gas Co. customers will pay 18.3 percent less next month than was predicted last autumn, according to DTE spokesman Joseph Donovan. The DTE-calculated rate reductions are based both on how many units of gas, measured in therms, the utilities' average residential customers use, and each utility's rate for gas supply, which differs from company to company based on when and where they signed contracts to get natural gas.

If gas prices stay at current levels or fall farther, New England energy consumers might also benefit from lower electric rates this spring. Natural gas is used to generate more than one-third of all electricity used in the region, and soaring natural gas prices last fall helped drive electric rate hikes of 30 to 50 percent for area homeowners and businesses.

Across the country, gas utilities have cut rates in recent days as the commodity price for gas at the New York Mercantile Exchange fell by nearly 50 percent since mid-December. With New England and most of the country enjoying unusually mild weather this winter, demand for gas is below projections and inventories are higher than expected, creating a supply-demand squeeze on prices.

Utility customers will not, however, see rates drop by the same 50 percent, because the utilities buy only a small fraction of the gas they sell consumers on the open market. In the case of KeySpan, for example, roughly one-third of this winter's gas supply was bought and physically stored during the summer, one-third was bought a year ago under fixed-price contracts, and one-third is being purchased as needed this winter.

While such a purchasing policy protects consumers when gas prices are rising, it also means gas rates come down slower than spot-market commodity prices because utilities carry large amounts of gas in inventory at above market prices. State regulators let utilities recoup the actual price of the gas they buy for consumers, but with no profit added.

Although gas consumers are facing less dire winter prices than forecast back in November and December, the average homeowner heating with gas will still pay about 30 to 35 percent more than last winter, according to the US Energy Department.

Peter J. Howe can be reached at howe@globe.com.