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    City Hall Says Higher Winter Gas Rates Coming Due Largely To Katrina

    (September 16, 2005) -- LB's City Hall-run municipal gas utility (part of LB Energy) says due largely to the effects of Hurricane Katrina, LB gas prices for residential customers this winter may average roughly 34% higher than last year...which is not as bleak as U.S. Dept. of Energy forecasts which project prices approximately 50% higher than last winter.

    "Last winter, the average residential customer paid $63 for their monthly gas bill. This winter, the forecasted average monthly residential bill will be $84. This forecast will continue to fluctuate as the longer-term market impacts of Hurricane Katrina evolve," writes Chris Garner, Dir. of LB Energy and Oil Properties in an informational memo agendized for the Sept. 20 City Council meeting.

    Mr. Garner's memo adds, "Currently, as has been the case for the past few years, LBEs customers receive, on average, the lowest monthly natural gas bills in comparison to other Southern California gas utilities. Despite the increase in market prices, LBE fully expects to remain highly competitive with these other utilities, and most likely, will continue to be the leader."

    His memo continues:

    Although the natural gas market may reach much higher price levels this winter, LBE is confident that customers will not experience gas bills anywhere near the levels experienced during the energy crisis of 2000/01. The City Council, upon the recommendation of the City Manager, approved long-term gas supply contracts that provide significant price protections.

    As protection against possible upswings in natural gas market prices, LBEís two major gas supply contracts include price ceilings of $1.00 per therm during the winter months of November through March. For comparison, the highest cost of gas charged to LBE customers during the 2000/01 energy crisis was $1.62 per therm. The current contractual price ceiling ensures that LBE customers will not pay more than $1.00 per therm for the "Cost of Gas" portion of their bill this winter, regardless of how high the actual gas market increases. The City is not aware of any other gas utility in Southern California with similar price protection.

    NOTE: The actual monthly cost of gas is passed through to our customers without any mark-up. The cost of gas makes up about two-thirds of a customerís gas bill. The other third is the fixed rates, set by the City Council, that provide for the pipeline transmission of the gas from the California border to the customerís meter and all associated customer services. Long Beach Energy has not recommended a rate increase for fiscal year 2006 for this non-commodity portion of our gas rates. Further price protection is provided through LBEís action of maintaining 8,000,000 therms in underground storage, purchased during the early summer months when prices were much lower. This lower-priced, stored gas will be used to help reduce the higher winter priced gas. [emphasis in original]

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