Sep. 19--With the cool of fall around the corner, Chicago-area consumers should get a warmer feeling about their heating bills: Retail natural gas prices have fallen dramatically over the past year, and barring a particularly ugly winter they are likely to stay low, experts say.

Natural gas prices hit a seven-year low earlier this month, courtesy of a surge in production coupled with slackened demand, the product of a mild summer and the weak economy. And those price cuts are being passed down to consumers.

Since July 2008, "gas prices have been dropping steadily," said Richard Caragol, a spokesman for Nicor Inc., the Chicago area's largest natural gas provider. This month, Nicor consumers are paying 33 cents per therm of gas, compared with 84 cents a year ago.

Customers of Peoples Gas and North Shore Gas have seen reductions as well. They should expect their total gas bill to be 28 percent lower this year compared with 2008, an average annual savings of about $500, said Bonnie Johnson, a spokeswoman for Peoples, which serves the city of Chicago, and North Shore. Both are owned by Chicago-based Integrys Energy Group Inc.

"That's just how low prices have fallen," she said.

Customers who are on billing plans that effectively spread high winter payments into the summer months, such as Nicor's "budget" plan, which allows for consistent payments each month, won't miss out on price cuts, Caragol said. Their bills are reviewed every four months and can be adjusted to account for rising or falling gas prices, he said.

The lower prices are, in part, thanks to a relatively cool summer that led to less air conditioner use, which in turn has reduced demand for natural gas among the nation's electric-power generators, Caragol said.

The tattered economy has played a role, too, weakening industrial demand for gas.

And to top it all off, there's a supply glut caused by a surge in natural gas production. Analyst Mark Chung of Colorado-based Bentek Energy said the supply surge has been tamping down gas prices more than diminished demand.

"Producers have been pretty aggressive," he said. "We've seen a huge amount of gas flood the market this past year."

The supply glut is partly due to the blossoming of new technologies that allow for more production per well, Chung said.

Gas companies like Peoples and Nicor buy gas in the summer, a relatively slow time, then store it for the peak winter season. This summer, "We were able to buy when prices were almost at rock bottom," said Peoples' Johnson.

So the low cost of that gas in storage should help serve as a cushion for the winter.

"If we have a regular winter, customers will be saving," Johnson said.

David Kolata, executive director of the Citizens Utility Board, a consumer watchdog group, said prospects for lower winter gas bills are looking good: "It looks like we will save a significant amount of money over last year."

Natural gas futures have spiked recently, climbing 28 percent this week, the biggest increase in nearly three years. But "that rally is not fundamentally driven," Chung said, saying it's fueled by speculators.

"We don't see the [gas supply glut] going away any time in the short term," Chung said.

Of course, weather, a key driver of fall and winter demand, is a fickle variable. From the perspective of natural gas producers, "That's the one thing that could help the situation: a really cold winter," Chung said.

Bloomberg News contributed to this report. mhughlett@tribune.com

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