Rising costs of natural gas have driven Mississippi’s energy bills to unprecedented levels in January.

Scrambling to put consumers on notice, energy suppliers are urging conservation and sending out warnings that the nationwide crisis will not abate as winter turns to spring.

&uot;We’re running ads in all the daily and weekly newspapers in our service area to advise people on how they can conserve,&uot; said Phil Hardwick, vice president for community and economic development for Mississippi Valley Gas Company.

&uot;The average consumer can’t control prices but can control consumption.&uot;

A cold winter and lower than usual inventory of natural gas have combined to create a supply-and-demand situation not good for consumers.

&uot;We’re concerned about summer and the high use of energy then,&uot; said Michael Callahan, Mississippi Public Service commissioner for the Southern District.

&uot;Natural gas is how most utilities want to generate electricity now. All the new plants are built to use natural gas because of environmental restrictions.&uot;

Electricity supplier Entergy, which serves parts of Mississippi, Louisiana, Arkansas and Texas, generates 70 percent of its power from plants that can switch from natural gas to oil, said Kelle Barfield, the company’s director of generation communications

Twenty percent of Entergy’s electricity is from the company’s nuclear facilities, such as Grand Gulf in Port Gibson and River Bend in St. Francisville, La.

And 10 percent comes from coal-burning plants.

&uot;Natural gas is one of the cleanest fuels,&uot; Barfield said. &uot;We’d like to use that and not to be dependent on foreign oil.&uot;

Like others in the energy industries, Barfield believes consumers have an important role to play as energy demands increase.

&uot;With power demands increasing and the population growing, we have to consider the environment,&uot; she said.

Why natural gas shortages?

Federal regulations during the past 15 years have favored the natural gas consumer rather than the supplier.

In a nutshell, profits fell for companies exploring for natural gas just as demands were beginning to grow.

Drilling for natural gas slowed. Yet environmental regulations forced many power generators to seek natural gas.

&uot;The growth in supply has not kept up with the growth in demand,&uot; said John Weatherly, senior vice president and chief financial officer for Callon Petroleum in Natchez.

By the mid 1990s, the price of natural gas had dropped to about $2 per thousand cubic feet, Weatherly said. In early 1999, the price was $1.80.

&uot;Those levels do not encourage a lot of natural gas exploration.&uot;

The United States is heavily dependent on the natural gas found in the shallower waters of the Gulf of Mexico, Weatherly said.

Companies working in the Gulf began to slash their budgets in the wake of soft gas and crude oil prices.

&uot;Overall production went down, beginning in 1998. The appropriate number of wells did not get drilled,&uot; he said.

&uot;At the same time, we had big economic growth but a supply of natural gas that was dead flat.&uot;

The supply of natural gas at the beginning of 2000 was alarmingly low.

As prices for the commodity began to increase, companies such as Callon began to respond.

&uot;But previously you had the Chevrons, Shells and Amocos operating on the Gulf shelf, and they had the capability to respond very quickly,&uot; Weatherly said.

The big companies by then had left for more lucrative drilling markets.

&uot;Smaller companies like Callon can’t respond as quickly; there’s not the same capital available.&uot;

What can be done?

Many smaller gas and oil exploration companies are now busy responding to the natural gas shortage and will benefit from the market.

&uot;We can’t solve the nation’s shortage, but we can do a lot,&uot; Weatherly said. &uot;There are absolutely opportunities on the Gulf shelf for companies like Callon to find gas and stay profitable.&uot;

Yet the shortage will persist beyond winter’s demand, he said.

The big demand in recent weeks has depleted an already low supply of natural gas in storage.

&uot;You’re not going to see natural gas prices tumble when the flowers start blooming,&uot; Weatherly said.

Between April and October, when usage of natural gas traditionally has been lower, energy suppliers begin storing the gas for winter.

&uot;This year people began looking at the amount of storage and it was way down,&uot; he said.

&uot;Storage this year could go down lower than we’ve ever seen it. It’s likely there will be high prices this summer.&uot;

On the commodities market, natural gas futures for May were $5.44 on Thursday. Prices in recent weeks have topped $9.

&uot;One thing that may influence the price is how many companies reactivate drilling for natural gas,&uot; Weatherly said.

Another factor may be a slow-down in the economy.

Natural gas usage breaks down this way, according to a report by investment firm A.G. Edwards:

Residential use accounts for 24 percent of the consumption.

Commercial enterprises consume 16 percent. Another 16 percent goes to generate electricity.

Industrial usage is the largest, at 45 percent of consumption.

&uot;There may be signs that demand has begun to decline,&uot; Weatherly said.

&uot;The draw of natural gas out of storage last week was higher than the same week last year, but if you take into account what the temperature was, the draw out didn’t go down in proportion.&uot;

In a December speech, Federal Energy Regulatory Commissioner James Hoecker hinted at the same possibility.

&uot;Perhaps the silver lining in the nation’s current economic cloud is that, as the economy cools down, energy demand growth may be effectively dampened,&uot; Hoecker said in the speech reprinted on the agency’s Web site.

&uot;Public policy makers and energy market participants could use this as a moment’s respite and an opportunity to achieve for electricity what Mr. Greenspan wants for the economy as a whole – a soft landing.&uot;

Coming Monday:

— Should Mississippi deregulate electricity?

Coming Tuesday:

— Conservation tips can save money.

Coming Wednesday:

— New energy sources may be key.