Natural gas price increases put chill on businesses

Natural gas rates, now at a two-year high, are burning holes in the pockets of Springfield consumers.

The cost for natural gas at City Utilities has increased about 50 percent in the last six months to 87 cents per therm. During that same time, usage also increased to combat colder-than-normal winter temperatures. The price jumped 21 cents this month, from 66 cents per therm in February.

Fortunately, as the prices climbed, temperatures did also. However, the business climate has not dramatically improved, and businesses are having difficulty adjusting especially companies that utilize large amounts of natural gas in day-to-day business. One example is manufacturers, such as Northrop Grumman Interconnect Technologies which uses natural gas in heating and for production work.

"Our marketplace has been struggling over the last two years, and cost control is one of the major things we have to face," said Bob Schutz, president of Northrop Grumman - Interconnect Technologies in Springfield. "Something like this, where we have extremely high utility costs, doesn't help the struggle at all."

The manufacturer of circuit boards eliminated its third-shift operations to save money, Schutz said, but demand for product didn't allow the company to operate that way for long.

One of the city's largest utility users, St. John's Health System, has found a way to save money by purchasing natural gas futures from CU, according to Bill Syler, vice president of facilities for the hospital.

"We work with City Utilities and buy futures in the fall, so 80 percent of our gas prices are preset," he said.

Cathy Meyer, manager of pricing at CU, said the utility purchased 7.7 million futures therms last summer. Customers have purchased 1.5 million futures therms since November, she said.

Syler said the hospital bought its futures at 46 cents per therm about half the March rate. Because rates are preset, buying futures is a bit risky.

"It's playing a game a little bit," Syler said, but "in a year like this, it makes us look like geniuses."

There is a minimal impact at times like this because only 20 percent of the natural gas used is charged at the market rate, Syler added.

"Had we not been buying futures on this, I'm sure that (our costs) would be 50 percent higher than this," he added.

St. John's Health System spent $840,000 or $140,000 a month on natural gas during this six-month climb in price.

Meyer said purchasing futures is a way for companies to save money, but it also is a benefit having a set price for the expense.

"I know that any customer that took advantage of it is saving money right now, but that's not necessarily what's going to happen," she said. "What it does is allow them to fix a portion of their gas costs so they know how much it's going to be."

Meyer said natural gas prices are expected to drop to normal levels next month. CU has been offering futures for four years. This year, three commercial customers purchased futures, Meyer said.

Schutz said Interconnect Technologies has purchased futures in the past, but opted not to last fall.

"No matter where you are in the United States, at this time people are facing higher energy costs," Schutz said. "It seems like death, taxes and energy costs are three things we can't control."

The higher costs have piqued interest in energy-efficient construction.

Greenblock of the Ozarks which specializes in energy-efficient construction, primarily through insulated-concrete-form technology is capitalizing on the increased interest.

Greenblock of the Ozarks Manager Andrew Conklin said although the company has built nine ICF-framed homes, the technology has yet to take off on the commercial end. The company is awaiting its first commercial project; Conklin said he has bids on a couple of projects, including an apartment complex.

While the construction costs are higher a 2,000-square-foot home generally will cost $5,000 more than traditional framing Conklin said the technology cuts heating and cooling costs in half.

Another new technology that improves heating efficiency is energy recovery ventilator systems, Conklin said. An ERV "acts as the lungs for your home," he said, by exchanging humid air from inside the home with fresh, purified air through HVAC ducts.

The ERV system, which costs about $1,500 including installation, holds in 80 percent of normal heat loss during the winter months, he said.

Greenblock of the Ozarks became an ERV dealership earlier this month. It sells the Venmar line, Conklin said.

St. John's has been using energy-efficient products since the late 1980s, Syler said, but as renovations occur on campus, updates are being made. Probably the biggest cost cutters at the hospital are "heat wheels" that recover about 90 percent of tempered air in the buildings, Syler said.

St. John's also uses all high-efficiency boilers and heavy insulation throughout the buildings, including glass and roofing, to minimize heating costs.

"If we didn't have the heat wheels we'd be utilizing 10 times as much energy as we use today," Syler said. "We do have some buildings that don't have the latest technology, but by and large, we'll change out a significant amount of that to be highly efficient as we renew our campus."