October 19, 2008 10:00 PM

If Amendment 58 passes, higher gas prices will "pass through" to home heating bills

Claim: If Amendment 58 passes, higher gas prices will lead to higher home heating bills
Rocky Truth Patrol says: Just wrong

A worried mother cradles a baby on her shoulder under the headline "My Family is Hurting" in the "No on 58" mailer from Coloradans for a Stable Economy, the group spending millions of dollars to fight increased taxes on oil and gas producers in Colorado. The brochure strikes a similar theme echoed on TV and radio ads: if voters boost severance taxes on oil and gas producers, they will get hit with higher energy bills to heat their homes.

The mailer says: "Amendment 58 is a poorly conceived energy tax that will push up prices -- especially natural gas prices for homes. Higher gas prices that will "pass through" to our home heating bills. Newspapers already report that home heating bills will go up at least 12 percent this winter. A record 72,000 households are expected to have their heat cut off."

Where do these scary figures come from and are they reliable? Xcel Energy released a forecast last month predicting that winter heating costs could increase by 12 percent this winter, but those prices have nothing to do with severance taxes. And, since that report was released costs for oil and gas have actually declined not increased, so the forecasts for natural gas costs this winter could actually go down.

Will oil and gas producers automatically be able to pass the costs of increased taxes along to Colorado consumers? Not necessarily. The gas market is extremely complex and the price, like any commodity, constantly fluctuates based on multiple factors.

We consulted an expert: Tim Carter, Director of Gas Supply for Xcel Energy, Colorado's largest supplier, which provides utilities to about 70% of Colorado homes.

"The market is going to set the price," Carter said. "The producers have a play in it. But supply and demand is what's going to set the price.

"The ability of the producer to recover this cost will depend on the market price on any given day,'' Carter said.

What's more, Carter said Xcel buys the majority of its gas from Wyoming suppliers, not those in Colorado. And, Wyoming has higher severance tax rates than Colorado. Therefore, the Truth Patrol determined that Amendment 58 opponents can't successfully make the case that there's a direct tie between increased severance taxes and higher home heating costs.

Dan Hopkins, spokesman for Coloradans for a Stable Economy, stands by his group's assertion that the pass-through is accuarate. He cites a guest column in the Rocky Mountain News from two former Public Utilities Commissioners who correctly reminded voters that Xcel charges consumers extra costs if they have to pay higher prices for gas. What the commisioners failed to acknowledge is that Colorado oil and gas producers will not automatically get to charge utility companies, like Xcel, more simply if their production costs increase. They'll be able to sell for the price they can command that day.

According to the Blue Book, if Amendment 58 passes, it will bring in an extra $321 million by budget year 2010 to support college scholarships for state residents, along with wildlife habitat, renewable energy projects and transportation projects in energy-impacted areas.

Posted by Katie McCrimmon at 10:00 PM | Comments (3)