Niagara Mohawk forecasts lower winter gas heat costs

SYRACUSE, N.Y., Sept. 20, 2001 — Because of a decline in wholesale market prices, Niagara Mohawk Power Corp. forecasts its residential natural gas customers can expect to experience a reduction of about 20 percent in their heating bills during the coming winter compared with last winter, assuming comparable weather and barring unforeseen circumstances in the market.

“Market supply-and-demand forces have brought wholesale costs down from last year’s record-high levels closer to the prices of the previous few years, and a freeze on Niagara Mohawk’s delivery charges remains in effect,” said Joseph T. Ash, vice president of Gas Delivery.

He noted that Niagara Mohawk does not profit from the cost of gas supply, passing those costs through to customers without markup. The company can earn a return only on the delivery portion of the bill — the cost to maintain the gas system and provide emergency response and other customer services. Pipeline transportation charges — the cost of bringing gas from where it is produced to Niagara Mohawk’s service territory — form the third component of a bill and are expected to remain stable.

As part of its proposed merger with National Grid plc, a freeze on Niagara Mohawk’s gas delivery charges would be extended by a year to August 2004.

Based on current wholesale commodity projections, a typical residential customer who paid about $900 in gas heating costs during the last November through April heating season should pay about $720 for the same amount of gas this winter.

For an entire year’s consumption from Nov. 1 to Oct. 31, a typical customer’s total gas bill is projected to decline to about $975 in 2001-2002 from about $1,175 in the current year.

Niagara Mohawk Power Corp. is a wholly owned subsidiary of Niagara Mohawk Holdings Inc. (NYSE: NMK – news), an investor-owned energy services company that provides electricity to more than 1.5 million customers across 24,000 square miles of Upstate New York. The company also delivers natural gas to more than 540,000 customers over 4,500 square miles of eastern, central and northern New York.

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