Rising natural-gas prices pinch companies Deirdre Gregg Staff Writer For Dillanos Coffee Roasters, the cost of buying natural gas for its Sumner plant has shot up about 20 percent in the past three months.
But the real pain may still be ahead, as natural-gas prices jump sharply higher this fall.
Dillanos doesn't want to raise its prices, Vice President Keith Hayward said, in part because its coffee-retailer customers are facing increased costs of their own, including a higher minimum wage that begins in January.
That's a calculation many businesses may be making this fall, when all four natural-gas utilities that supply Washington will increase their prices by amounts ranging from 12 percent to 26 percent.
The cost of natural gas has gone way up -- a result of hurricane disruptions and high demand for gas from other sectors, including power companies.
This winter, rising natural-gas prices will increase costs for a wide range of businesses: coffee roasters and other food processors, chemical companies, building owners who use natural gas for heat, power companies that burn it for electricity, factories and many others.
Many of those businesses are facing a tough choice between trying to pass on costs to their customers or swallowing the additional costs themselves. That can mean deferring capital investments, putting off new hires, delaying raises -- or, in some cases, going out of business.
"Energy has clearly been one of the critical advantages of the region, but we've seen it diminish over time, and a price shock like we have now can be lethal," said David Zepponi, president of the Portland-based Northwest Food Processors Association. "We're very worried."
Indeed, an October report by the Washington, D.C.-based National Association of Manufacturers said that because of manufacturers' thin margins, even small changes in the cost of raw materials and energy can dramatically affect profits.
Natural-gas prices have risen quickly over the past several years. In part, increases were spurred by demand from power companies, which are opting for cleaner, gas-fired power plants rather than conventional coal. Electric power plants were consuming 24 percent more natural gas in July 2005 than July 2004, according to the federal Energy Information Administration.
Then came hurricanes Katrina and Rita, knocking out more than 250 oil and natural gas platforms. Almost 9 percent of the Gulf Coast's annual production of natural gas was lost between Aug. 26 and Oct. 19, according to the U.S. Minerals Management Service.
That combination has driven the natural-gas rate hikes, with utilities predicting customers will pay 30 percent to 70 percent more in some parts of the country.
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