By Tom Doggett
WASHINGTON, Dec 12 (Reuters) - As U.S. natural gas and electricity prices soar on tight supplies and an Arctic cold front, the Clinton administration warned it would not allow power generators to drive up West Coast prices deliberately to make quick profits.
Natural gas futures prices reached a record high of $9.41 per million British thermal units (Btu) on Monday, about four times above year-ago levels, but dropped back to the low $8 range on Tuesday.
U.S. Energy Secretary Bill Richardson called on generators to act responsibly in the western United States, which is experiencing power supply shortages and skyrocketing electricity prices. Both are due to heavy demand and shrinking natural gas supplies to fuel electric generating plants.
``While I have no specific knowledge of any such activities, it is important that generators located throughout the region and in Canada and Mexico understand that the (Clinton) administration will not tolerate any actions designed to take advantage of the situation,'' Richardson said on Monday night.
Meanwhile, another government official warned on Tuesday that the United States will face high natural gas prices for the foreseeable future due to continued low gas supplies.
COLD WINTER BOOSTS POWER DEMAND
``High and volatile gas prices will prevail until significantly more gas supplies enter the market, although the likelihood of that in the near future is not high,'' said Mark Mazur, acting head of the U.S. Energy Information Administration. Mazur testified before the Senate Energy Committee's hearing on current conditions in the natural gas market.
This winter is forecast to be colder than the last three winters, resulting in a 6 percent increase in natural gas consumption over last year, Mazur said.
Consumer heating bills will rise more than 50 percent this winter, to an average $834 per household for natural gas, the EIA said.
Mazur said natural gas prices received by producers at the wellhead would remain above $4 per thousand cubic feet at least through the rest of 2001.
To make the point about current tight power supplies, the chairman of the Senate Energy Committee pointed out that the lights on the panel's Christmas tree were not turned on during the hearing.
``We practice what we preach here,'' said Alaska Republican Senator Frank Murkowski.
In addition to warning power suppliers not to gouge consumers, Richardson again called on the Federal Energy Regulatory Commission to impose short-term price caps on the wholesale power sold throughout the West. The agency was scheduled to hold a special meeting on Friday to consider the dire situation in California's deregulated power market.
``Given recent developments in the Western power markets, it is even more urgent that FERC act expeditiously to impose some constraints on spiraling electricity prices, not just in California but throughout the region,'' Richardson said.
``Electricity supplies in parts of the region are tight and the prices charged for wholesale power in the region continue to spiral out of control,'' he added.
Richardson said the Energy Department took several steps to increase electricity supplies in the West, including:
* Ordering both the Bonneville Power Administration and the Western Area Power Administration to provide as much power to California as possible during supply shortages, and
* Ordering federal offices in California and four other western states to cut electricity consumption by turning off unnecessary computers, lights, escalators and elevators.
KAISER ALUMINUM CRITICIZED
Separately, Richardson criticized Kaiser Aluminum Corp. (NYSE) for ``taking advantage'' of high market prices for electricity in the Pacific Northwest.
Kaiser is temporarily shutting down operations in the region and can resell power it purchases from the federally owned Bonneville Power Administration for higher prices.
Kaiser said last weekend it would receive about $52 million from the sale of December power, but might take a charge against corporate earnings in the fourth quarter because of the uncertain long-term outlook for power in the region.
``While Kaiser will make millions from the use of a federal resource, I am concerned that this is coming at the expense of employees that will be out of work and that may not be fully compensated,'' Richardson said.
Richardson said he instructed Bonneville to ``explore all necessary actions'' to stop Kaiser from reselling the power."