Consumers with wood-pellet stoves are facing a severe shortage of the only fuel that can be used in those stoves: processed wood pellets.

"The pellet-stove industry was caught by surprise by the tremendous demand for wood-pellet stoves and the pellet fuel that they burn," said New York Consumer Protection Board (CPB) Chairman and Executive Director Teresa A. Santiago.

"Because this shortage is expected to last the entire winter, the CPB is asking consumers and retailers to ration the limited supply of processed pellets."

Consumers who do not have an adequate supply may have to use an alternative source of energy depending on the severity of this winter, Santiago said.

How cold it gets this winter "is really the X factor in all of this," said Greg Palmer, president and owner of Dry Creek Products, a pellet manufacturer in Arcade, N.Y. "From where we sit right now, with a mild winter, things could change relatively fast. But with a normal winter, then I think the supply will be tight for the entire season."

The CPB is urging consumers to limit their purchases to no more than the three tons of pellets, which is enough to heat most homes for an entire winter.

While some stoves can burn corn kernels, cherry pits and other material, some stoves can only burn pellets and consumers should be careful to follow the manufacturers specifications.

Retailers, meanwhile, have been struggling to find any pellets for sale. But those that have a supply should ration their sale to no more than 10, 50 or 40-pound bags per customer, the CPB is recommending. The cost per bag has risen from $3 to between $7 and $10.

The demand for pellet stoves increased dramatically following the severe price increases forecast this winter for natural gas, heating oil and propane.

The hurricanes in the South also heightened consumer concerns, leading to record demand for pellet stoves, industry sources said.

Despite this high demand, wood-stove retailers are being honest with consumers by warning them about the severe shortage of pellets, a survey by the CPB found.

"Our only concern is that some dealers who sell wood pellets have previously entered into advance-payment contracts that they cannot fulfill now because of the severe shortage of wood pellets," said Santiago.

The shortage in New York and other eastern states is not expected to end until next spring.

In addition to increase demand for pellets, the shortage is also due to a reduction in the availability of sawdust and other wood waste products that are used to manufacture pellets. Thats because this waste product is now being used to make other products.

The demand for pellet stoves and fuel is unprecedented, according to Bruce Lisle, President of the Pellet Fuel Institute, an industry trade group.

In a press statement, Lisle said, "When you combine the economic effects of Hurricane Katrina with the dramatic increases in home heating oil and natural gas prices, it is no secret that manufacturers have a challenge keeping up with the spike in demand this winter.

"Pellet fuel manufacturers are doing everything possible to meet this challenge by running their plants at capacity and increasing production. The industry is also looking to move product from areas with excess to areas with greater demand. In addition, there are non-premium grade fuels available for stoves that can burn an industrial grade of fuel," said Lisle

Compounding the problem, leading pellet manufacturers in Canada are in the midst of long-term contracts with buyers in Europe. Those contracts were signed when the demand for wood pellets was low during the mild winters of 1998 and 1999.

Pellet fuel manufacturers indicate that they have made plans to meet future demand by significantly increasing production. In a recent survey, PFI member companies state the industry plans to ship over 350,000 additional tons next year, a 35% increase.

In addition, the industry anticipates new pellet mills being added in 2006 that could generate an additional 120,000 tons of pellet fuel for next winter.

"Rest assured that the pellet fuel industry will do all it can to make sure that consumers have the fuel they need. More importantly, the industry is well positioned to meet future demand," said Lisle.