In this issue:

• Rising natural gas prices: What to expect
• Prepare to control your winter heating costs
• Consumers have options for payment assistance
• Help available when shopping for natural gas
• Q&A: Local telephone deregulation

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Rising natural gas prices: What to expect

Natural gas prices have been on the rise over the past few years and there are no indicators that rates will be coming down any time soon. The temperature outside will play a significant role in whether prices will increase this winter and if so, by how much. The Office of the Ohio Consumers' Counsel (OCC) has prepared the following information about why natural gas prices are so high and what consumers can do to help manage their natural gas bills this winter.

How is the United States' supply of natural gas used?

The United States' supply of natural gas is used by four primary categories of customers:

• Commercial - 15 percent is used by churches, schools, hospitals and other businesses

• Industrial - 35 percent is used by manufacturing plants and other types of production facilities

• Residential - 25 percent is used by homes and apartments

• Electric power generation - 25 percent is used by power plants to generate electricity

Since the early 1990s, almost every new electric power plant uses natural gas. Tighter air pollution laws sent electric power generators looking for cleaner types of fuel like natural gas. Prior to that period, these plants primarily operated using coal, nuclear power and other fuels.

The amount of residential homes that use natural gas for heating and cooking also has increased dramatically over the past 35 years. In the Midwest alone, 92 percent of all new homes being built use natural gas.

Do we have enough natural gas to meet the current demand?

While the United States currently has enough natural gas to meet demand, new production is needed to ensure natural gas is available in the future. The United States produces the majority of its own natural gas supply. Over the past couple of years natural gas drilling has increased. However, these new wells have to be drilled deeper and are providing less natural gas than older, more productive wells.

What are the factors that impact natural gas prices?

Weather - Speculation about this year's hurricane season and its impact on natural gas production sent summer natural gas prices soaring to record highs. The hot summer temperatures also resulted in an increased demand for electricity from natural gas fired power plants as people used more and more electricity to cool their homes and businesses. This coming winter may also affect natural gas prices. The lower the temperature falls, the more the nation will rely on natural gas for heat.

Limited Production - Prior to 2000, the nation had experienced a number of mild winters, which helped create a natural gas surplus. The surplus caused natural gas prices to remain low. As prices stayed low, natural gas production became less profitable and exploration and drilling slowed dramatically. Although natural gas exploration and drilling have increased, there is now a greater demand from electric generators on these new natural gas supplies.

Oil Prices - This year, world oil prices have dramatically increased. Uncertainty in the Middle East, Venezuela and Russia, increased demand from other countries like China and India and the current economy are just some of the factors that have caused prices to rise. Because many large industrial plants can interchangeably use oil and natural gas as a fuel source, the prices for these two sources of energy tend to be closely linked. Therefore when oil prices increase, natural gas prices also increase.

What can be done on the national level to reduce natural gas bills?

Recently, federal energy legislation was passed that begins to address some of the issues affecting nationally escalating energy bills. Increased appliance efficiency standards is one way in which the new energy bill may help consumers reduce their energy usage in the future. It is important for consumers to understand that this bill will not have an immediate impact on natural gas prices. While this legislation has the potential of creating long-term benefits, more is needed in the short term to help consumers lower their bills.

The OCC advocates for Ohio's utilities to offer and support comprehensive energy efficiency programs that will enable their customers to take control of their energy usage and ultimately lower their monthly bills.

What can I do to help manage my natural gas bills?

Whether a customer chooses to purchase natural gas from a competitive supplier, conserve more energy in their home or take advantage of budget billing programs, there are several options available to assist customers. For more information about natural gas prices and resources for managing your winter heating bills, contact the OCC toll free at 1-877-PICKOCC (1-877-742-5622) or visit www.pickocc.org.

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Prepare to control your winter heating costs

While it seemed like the summer's hot temperatures would never end, cooler weather should serve as a reminder that heating bills are just around the corner. It is important that residential consumers look at potential home improvement projects now that will help them use energy more efficiently this winter. Completing some projects may take several weeks, so it is important to identify improvements early to be able to take advantage of savings opportunities throughout the entire winter heating season.

Start with an energy audit to identify the best and most economical ways to reduce heating bills. A do-it-yourself room-by-room audit will locate areas in the home where the most energy is lost. The U.S. Department of Energy has more information about home energy audits at www.eere.energy.gov/consumerinfo/tips or by calling 1-877-337-3463 toll free.

Some key tips to prepare for winter include:

• Evaluate the insulation in the attic and around the ducts. A significant amount of energy is lost when heat is allowed to escape. Knowing the amount and type of insulation currently in the home will determine whether more or a higher "R-value" insulation is needed.

• Fix any cracks or holes in or around walls, ceilings, windows and electrical outlets. A significant amount of heat can escape if cracks or holes are not repaired.

• Clean or replace the furnace filter. Depending on the furnace model, a consumer may need to change the filter on a regular basis, possibly each month. Consumers should follow the instructions from the manufacturer of the furnace or filter system. A clean filter will likely improve both the air flow and the efficiency of the furnace.

• Clean registers, baseboard heaters and radiators. In addition, be sure that furniture, drapes or other objects are not blocking where the heat enters a room.

• Consider purchasing a programmable thermostat. These thermostats, which often range in price from $30 to $100, are a convenient way to ensure that a home is heated on a pre-set schedule. They store six or more settings per day, enabling the thermostat to automatically drop the temperature when everyone is asleep or no one is in the home. Some programmable thermostats are not efficient when used with heat pumps, so be sure to find an appropriate model.

• Make the fireplace more efficient. Purchases that will help improve the use of a fireplace include tempered glass doors and a heat-air exchange system. The glass doors help control the fire and how air moves up the chimney. An exchange system works to blow warm air back into the room. If you never use the fireplace, consider plugging and sealing the chimney flue.

Consumers should expect heating bills to be high this winter, so it is important to explore home improvement projects now that have the potential to provide short and long-term energy savings.

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Consumers have options for payment assistance

With colder temperatures around the corner, many Ohioans are exploring options so they will stay warm during the winter heating season. The Office of the Ohio Consumers' Counsel (OCC) offers information to help consumers stay connected this winter.

Budget Billing

Budget billing programs allow consumers who are current on their payments to spread the amount they owe over a 12-month period. Consumers should contact their utility company to inquire about how to participate.

Payment Plans

When facing disconnection, consumers can propose to the company a payment plan that works best for them. If the company finds the proposed payment plan not acceptable, it must provide an option of participating in either the 1/3 (where customers pay 1/3 of the total amount due each month, which includes their past due balance and current bill) or 1/6 (where customers pay 1/6 of the past due balance in addition to paying the full amount of the current bill) payment plan.

Home Energy Assistance Program (HEAP)

HEAP is a federally funded program that provides a one-time payment during the winter heating season toward an energy bill for income-eligible consumers. Emergency HEAP (E-HEAP) is available for low-income consumers who have been disconnected from their heating source, have received a disconnection notice or have less than a 10 day supply of bulk fuel. Consumers can apply for HEAP September 2005 through March 31, 2006 and for E-HEAP from November 1, 2005 through March 31, 2006.

Percentage of Income Payment Plan (PIPP)

PIPP is a low-income program that enables customers who have a household income at or below 150 percent of the federal poverty level to pay a percentage of their income towards their monthly electric and natural gas bills. The remaining account balance is carried over each month and continues to accumulate. Consumers are responsible for paying the accumulated amount once they are no longer eligible for or decide they no longer want to participate in PIPP.

In addition, low-income consumers may be eligible for Ohio's Home Weatherization Assistance Program (HWAP), a federally funded residential energy efficiency program. The program aims to reduce energy use in homes by helping to insulate attics, walls and basements; provide health and safety testing and inspections; and perform heating system repairs or replacements.

For more information on available financial assistance programs, call the OCC toll free at 1-877-PICKOCC (1-877-742-5622) or visit www.pickocc.org.

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Help available when shopping for natural gas

As the winter heating season approaches, many consumers begin to determine if they should choose an alternative natural gas supplier. In Ohio, almost 1.2 million residential consumers purchase natural gas from an alternative supplier. Generally, late summer into early fall is the best time to research offers and switch to a supplier. To help consumers make a more informed decision, the Office of the Ohio Consumers' Counsel (OCC) offers the following publications:

Gas Choice 101: This publication provides consumers with a step-by-step guide to use when shopping for a new natural gas supplier. They will learn how to enroll, about supplier agreements, which questions to ask and many other important issues relating to the gas choice program.

Bios for alternative suppliers (outdated link): For consumers who want to dig deeper than just the rate and terms offered by a supplier, the OCC provides bios for each supplier serving residential consumers in Ohio. Information includes the history of the company, business ventures in Ohio and nationally, and additional items such as types of offers.

Historical regulated natural gas rates: Consumers who wonder about how much they paid for natural gas in the past now have a way to find that information. The OCC has collected information on how much the Gas Cost Recovery (GCR) rate was over the past four years for Cincinnati Gas & Electric, Columbia Gas of Ohio, Dominion East Ohio and Vectren Energy Delivery of Ohio.

Comparing your energy choices: Since Cincinnati Gas & Electric, Columbia Gas of Ohio, Dominion East Ohio and Vectren Energy Delivery of Ohio all use monthly Gas Cost Recovery rates, it is nearly impossible to compare supplier offers to the rates of these companies. However, consumers can verify charges on their bills as well as calculate what they might pay if they switch to an alternative supplier by using "Comparing Your Energy Choices" and the interactive counterpart, "Calculating Your Energy Choices."

Consumers can view OCC's publications online at www.pickocc.org or request a copy by calling toll free 1-877-PICKOCC (1-877-742-5622).

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Q & A: Local telephone deregulation

Q.Has basic local telephone service become deregulated in Ohio?

A.No, however a new law recently passed by the state legislature allows the Public Utilities Commission of Ohio (PUCO) to consider deregulating basic local telephone service. Basic service includes the price residential customers pay for their dial tone and the ability to make local calls. The PUCO will soon begin writing rules based on the law that will detail how deregulation could occur. The Office of the Ohio Consumers' Counsel (OCC) is concerned that this law and the PUCO's rules could mean higher monthly bills for residential consumers.

Q.Under the new law, what would deregulation do?

A.Based on how the PUCO rules are written, regulated local telephone companies - including ALLTEL, Cincinnati Bell, SBC, Sprint, Verizon and 37 smaller providers - could raise their monthly rates at any time and to any price without any regulatory review or approval.

Based on rules adopted by the PUCO in 2001, seven of the eight largest regulated local telephone companies are not currently able to raise the price of basic local service. In exchange, they are able to increase the prices of many features like Call Waiting and Caller ID with Name. Some companies have chosen to significantly increase the prices of features since being able to operate under the rules.

Q.Will more local telephone choices become available?

A.The OCC believes that even if the price of basic service increases significantly, customers of most of Ohio's telephone companies will have few or no choices, especially if they do not want to pay for a package including features like Caller ID and Call Waiting. While some competition has developed in areas served by Ohio's larger local telephone companies, savings opportunities have been very limited for customers only wanting basic service. In addition, the proposed mergers of SBC and AT&T as well as Verizon and MCI will likely mean fewer choices for consumers in most parts of Ohio.

Q.If deregulation occurs, will residential consumers have fewer protections against price increases?

A.Yes. Traditionally, local telephone companies have had to demonstrate the need for most price increases. Deregulation would allow local telephone companies to dictate the price customers must pay for basic service. The OCC believes that unless customers have a choice of companies for basic local service, that service should be regulated to ensure that the price is fair and reasonable.