TROUBLE AHEAD,
TROUBLE BEHIND
SOME THOUGHTS ON THE ENERGY OULOOK
AND THE LOW-INCOME CONSUMER
INTEREST
NCAF LEVERAGING CONFERENCE
ST. PETERSBURG, FLORIDA
OCTOBER 25, 2006
EIA Winter Outlook
For 2006-2007
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Heating Oil Prices Flat
Heating Oil at $2.46 per gallon
Natural Gas Prices Down 16%, Propane Down 5%
Natural Gas at $12.23 per mcf, Propane at $1.85 per
gallon
Electricity Prices up 5 %
National average of 10.1 cents per kwh
A Normal Winter Will Wash Away The Price Drop
Last Winter Was So Warm It Was Off The Charts!
HISTORY OF MIDWINTER NATURAL GAS
COMMODITY PRICE
Price Trend For January 07 Futures Contract
Source: Wall Street Journal, 9/19/06
EXPECTED EXPENDITURES
FOR 2006-2007
Low-Income Households
By Primary Heating Fuel
$2,714
$3,000
$2,500
$2,000
$2,311
$1,832
$1,289
$1,500
$1,000 $806
$1,344
Heating/Cooling
Total Bill
$1,034
$520
$500
$0
Natural
Gas
Propane
Source: ORNL Tabulation from EIA STEO & RECS
Fuel Oil Electricity
SHORT-TERM MARKET CONDITIONS
SUPPLY
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Inventories well above
average levels for all
major fuels
No repeats of
Hurricanes Katrina and
Rita
Most (but not all)
production losses from
last year restored
DEMAND
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Normal weather will
increase demand
Consumers of fuel oil
and propane now
compete with European
demand
Natural gas demand is
highly dependent on
industrial and power
generation growth
RESIDENTIAL PRICE TRENDS SINCE 1997
EIA HISTORICAL DATA
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Home Heating Oil
Prices have increased
138% since 1997
140.0%
120.0%
100.0%
80.0%

Natural Gas Prices
have increased 85%
since 1997
60.0%
40.0%
20.0%
0.0%
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Electricity Prices are
up 26% since 1997
Heating Oil
Natural Gas
Electricity
AGGREGATE RESIDENTIAL ENERGY EXPENDITURES
BY LOW-INCOME HOUSEHOLDS
Eligible for LIHEAP
By Primary Heating Fuel
Millions of Dollars
$70,000
$60,000
$50,000
Fuel Oil
Nautral Gas
Propane
Electricity
$40,000
$30,000
$20,000
$10,000
$0
2001
2004
2005
SOURCE: ORNL TABULATION BASED ON EIA STEO AND RECS
2006
2007
Natural Gas Supply, Consumption, and Imports Are
Projected to Expand Through 2025
(1970-2025, trillion cubic feet)
35
History
Projections
Net
Imports
30
25
Consumption
Production
20
Natural Gas Net Imports, 2001, 2025
(trillion cubic feet)
6
15
5
4
3
10
Source: AEO 2003
2
1
0
5
0
1970
1980
2001
2025
1990
2000
Pipeline
2010
Liquefied Natural Gas
2025
HOME HEATING OIL
NO PRICE CONTROLS
NO SIGNIFICANT PRICE REGULATION
LARGE COMPANIES AT TOP OF
PRODUCTION CHAIN AND SMALL ONES AT
THE BOTTOM
WELL DEVELOPED FUTURES MARKETS
AND ESTABLISHED PRICE/VOLATILITY
REDUCTION METHODS
JAWBONING
NATURAL GAS
DEREGULATED AT THE WELL HEAD,
COMMODITIES TRADING MARKETS
FEDERAL PIPELINE REGULATION
LOCAL DISTRIBUTION COMPANY
REGULATION
MAJOR CHANGES IN MARKET CONDITIONS
REGULATORY INTERVENTION
OPPORTUNITIES IN PRICE VOLATILITY
REDUCTION, RESOURCE ACQUISITION
AND CONSUMER PROTECTION
ELECTRICITY
PARTIAL DEREGULATION OF WHOLESALE
ELECTRICITY IN SOME PLACES AND
COMPANY CONSOLIDATION, NEW
MARKET MECHANISMS LIKE RTOs
CONTINUED REGULATION OF
TRANSMISSION AT FEDERAL AND STATE
LEVEL
STATE REGULATION OF LOCAL
DISTRIBUTION
PUBLIC BENEFIT FUND PARADIGM,
EFFICIENCY INVESTMENTS, RATE CASE
PROCEEDINGS
TIGHT MARKETS MEAN MISCHIEF
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REMEMBER ENRON AND CALIFORNIA?

AN INVITATION TO SPECULATION AND
MANIPULATION
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WATCH OUT FOR THE ECONOMISTS!
HISTORY OF MIDWINTER NATURAL GAS
COMMODITY PRICE
Price Trend For January 07 Futures Contract
Source: Wall Street Journal, 9/19/06
MARKET DANGERS
MISALLOCATION
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PROBLEMS COMMON TO ‘NETWORK’
INDUSTRIES
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SUPPLY IS PRICED AT THE MARGIN WHILE
CONSUMER PRICES DISCRIMINATE
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BOOM AND BUST INVESTMENT CYCLES
CREATE INCENTIVES FOR PRODUCERS TO
TRY TO SHIFT RISKS TO CONSUMERS
MARKET DANGERS
SPECULATION
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A GROWING PERCENTAGE OF TRADE
IN ENERGY MARKETS IS SPECULATIVE
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THIS INCREASES PRICE VOLATILITY
AND PUSHES PRICES UP AND DOWN
MORE SHARPLY
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MUCH OF THE TRADE IS
UNREGULATED WITH NO OVERSIGHT
MARKET DANGERS
MANIPULATION
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WITH POOR REGULATION COMES LACK OF
INFORMATION NEEDED TO PREVENT
PROFITEERING
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PRICES CAN BE MOVED IN EITHER
DIRECTION!
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UNDER THE RIGHT CIRCUMSTANCES
INDIVIDUAL ACTORS CAN CONTROL AND
DIRECT PRICES
WHAT CAN WE DO?
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Don’t Drink The kool-Aid
Defend The Provider Of Least Resort With A
Balanced Supply/Price Portfolio
Pursue Supply Surplus
Fight Monopoly Market Pricing
Keep Public Benefits Together- Sustainability and
Affordability Hand In Hand
Consumer Protection Regulation & Info Vital
When’s The Next Train?
IN SHORT…
SIGN AND ORGANIZE
AROUND THE PRINCIPLES
OF ENERGY AND WATER
SECURITY FOR ALL
AMERICANS
 www.ncaf.org/issues/energy
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