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Natural gas rates go up 40 percent, but there's more to it

Duluth residents received notice this week that their natural gas rates will jump 40 percent in February, but that's only part of the story. If colder than usual conditions persist, residents will feel even more of a sting.

Monthly natural gas consumption in Duluth in the past three months has set records, according to Pete Upton, chief gas controller for the city's public works and utilities department.

Compared with the same month last winter, demand for natural gas was up 81 percent for December 2013, 24 percent for January 2014 and 23 percent for February 2014.

Upton said this winter also has shattered several daily records for total natural gas use in the city of Duluth.

Eric Schlacks, a gas and energy coordinator for the public works and utilities department, explained that the city contracts for natural gas on the basis of average past consumption, but this year's unusually frigid weather has driven it to purchase more gas than usual on the spot market, which has been subject to severe price spikes.

Upton said natural gas that sold for $3.50 per 100 cubic feet in November recently has sold for more than $50 per 100 cubic feet on the spot market.

"The spot market prices have been very volatile, and that's a result not just of Duluth being cold but much of the nation," he said.

Natural gas prices also have been driven higher by increased demand from the power industry, which has been transitioning away from dirtier-burning fuels, such as coal.