Aug 16 , 2012
It takes a village to get natural gas delivered to your home safely, reliably and affordably
In our previous articles, Natural Gas Pricing 101, Part 1
and Part 2
, we explained that more than half of a customer's monthly natural gas bill is the cost of the natural gas we purchase on the wholesale natural gas market and the transportation costs to get that natural gas to our system. The remaining portion of the bill, about 45 percent – or 45 cents of every dollar a customer pays for natural gas – covers our costs of delivering natural gas to a home or business.
If you’re a Washington natural gas customer, your
rates are at levels similar to those from 2003. (click
on image above and below to enlarge)
Did you know our customers are paying less today for natural gas than they were 10 years ago when you adjust for inflation? This is mostly because of the declining prices of natural gas on the wholesale market. As the chart shows, if you’re a Washington natural gas customer, your rates are at levels similar to those from 2003. When adjusted for inflation, natural gas rates in both Idaho and Washington have stayed fairly level over the past 50 years.
How do rising delivery costs impact your natural gas bill?
Avista takes the responsibility of maintaining and updating our natural gas delivery system seriously. We have an obligation to serve every customer who requests service and to comply with state and federal requirements. Safety and reliability are paramount to our operations.
Just like upgrading or replacing items in your own home, when we replace or upgrade older equipment, the cost of that equipment is many times more expensive than when it was originally installed. Capital investments like these, which are required to ensure the ongoing delivery of natural gas, along with rising operations and maintenance costs, continue to drive the need for increased rates. For instance, we’re working to replace miles of natural gas pipeline that has reached the end of its service life. The six-month, $3 million project in Davenport, Wash. is just one example of our commitment to maintain and upgrade our natural gas pipeline.
We file requests to recover these costs through our general rate cases, like the one we made to the Washington State Utilities and Transportation Commission in April of 2012. State regulators provide Avista the opportunity to earn a fair return, or profit, on the investment our shareholders have made in the facilities used to provide service to customers. The key word there is “fair,” and here’s how it works: When our costs change, Avista files a request with the state regulatory commission for a rate change. The commission scrutinizes every detail of our costs, reviews volumes of data and takes public testimony. Based on its investigation, the commission sets rates it believes serve the public interest – rates that are reasonable and fair for customers, while allowing Avista the opportunity to be a viable, healthy business and earn a fair return for shareholders, and enabling us to continue delivering safe, reliable energy.
In our last article,
we mentioned Purchased Gas Adjustment (PGA) filings. PGA filings are usually separate from general rate requests, and there are times when one of our state commissions may be reviewing a PGA request to decrease rates based on wholesale natural gas costs, while at the same time reviewing a general rate request to increase rates based on rising capital costs. Since we serve electric and natural gas customers in three different states it can be confusing for our customers to keep track of rate filings and rate changes. But as a regulated, investor-owned utility, we have to comply with the regulations set by the utility commissions in the three states where we serve customers, and we can’t increase or decrease rates without receiving approval from the commissions.
Here’s the bottom line: while the wholesale price of natural gas has declined over the past few years, the cost of delivering that natural gas continues to rise, and natural gas rates include both of these costs. Avista works hard to manage costs, improve efficiency and productivity, and be smart about how we purchase natural gas. We take pride in maintaining a system that keeps natural gas safe, reliable and as low-cost as possible.
This wraps up our three-part “Natural Gas 101” series. We’d love to hear your comments and questions. Please direct them to Communications Manager, Anna Scarlett
. Read our previous articles at the links below.
Read the series
Aug 08 , 2012
How does Avista pass the costs of natural gas through to you? (Hint: we don’t mark it up!)
Click on the above image to enlarge the breakdown
example of a customer's natural gas bill.
You may have heard some good news
Avista shared last week with our Idaho customers. We filed requests with the Idaho Public Utilities Commission to decrease natural gas and electric prices. If the request is approved, this will be the second natural gas price reduction this year in Idaho and natural gas rates will have decreased by more than 14 percent overall in 2012.
If you’re an Avista natural gas customer, you have some of the lowest natural gas rates in the Northwest, and the wholesale natural gas costs in your bill have also dropped significantly in recent years. In fact, through rate decreases proposed by Avista and approved by state regulators, Avista customers have seen the wholesale price of natural gas decrease by almost 50 percent since 2008.
But a 50 percent drop in wholesale prices doesn’t equate to a 50 percent reduction in your natural gas bill, because the rates you pay cover much more than just the wholesale cost of natural gas itself.
In our article last week,”Natural Gas Pricing 101, Part 1: Natural Gas Supply,”
we explained how the combined costs of purchasing natural gas on the wholesale market and having it transported to our distribution system for delivery to you is about 55 percent of your natural gas bill – or 55 cents of every dollar you pay for natural gas. We work hard to keep these costs as stable and low as possible.
Avista customer's have seen the wholesale price of
natural gas decrease by almost 50 percent since 2008.
Let’s break that 55 percent down even further. The wholesale cost of the natural gas itself is about 38 percent of your natural gas bill. Avista does not make a profit on the cost of natural gas that is purchased to meet customer needs. You pay what we pay. Another 17 percent of your natural gas bill is the costs of transporting the natural gas on pipelines from the source or supply basins to our distribution system for delivery to you. While we also don’t mark up or make a profit on transportation costs, they are fixed, and have not declined like the cost of the gas itself has in recent years.
The remaining portion of your bill, about 45 percent, covers the cost of the equipment and people it takes to safely and reliably deliver natural gas through our distribution system to your home or business. State regulators provide Avista the opportunity to earn a fair return, or profit, on the investment our shareholders have made in the facilities used to provide service to you, and we’ll talk more about that in our next article.
What exactly is a Purchased Gas Adjustment (PGA)?
So how do we pass wholesale natural gas and transportation costs through to you, whether it’s increases or decreases in wholesale prices, or changing transportation costs? We call it a Purchased Gas Cost Adjustment, or PGA.
Our customers love the benefits they get from natural gas, but they don’t want surprises, especially in their energy bills. Imagine if your natural gas prices fluctuated like gasoline prices do. You might see your natural gas rates rise and fall several times in a month.
To keep this from happening, once each year Avista requests an adjustment in the natural gas rates our customers pay, to reflect our actual costs of purchasing natural gas on the wholesale market and transporting it to our system for delivery. These PGA requests to the utility commissions in Washington, Idaho and Oregon are usually made annually in August or September, and the new rates take effect by winter. Additionally, when wholesale prices of natural gas change significantly, we can make requests at other times of the year.
When costs are down, it’s good news for our customers, and we want to pass these price decreases on as quickly as we can. So far in 2012, Avista has filed out-of-cycle PGA requests
with the utility commissions in Washington and Idaho, as well as our regular annual request in Idaho
to reduce natural gas prices. Decreases took effect March 1 for our first requests, and, if approved, a second decrease for Idaho customers will take effect Oct. 1.
In fact, since 2009, Avista has filed 20 PGA requests for our customers; seven in Washington, nine in Idaho and four in Oregon – of those, 14 were to reduce gas prices based on declining wholesale natural gas costs. We expect to file our regular annual PGA requests in Washington and Oregon in the coming months. These changes in natural gas costs and the PGA rate adjustments do not increase or decrease Avista’s earnings and must be approved by state regulatory commissions.
Electric customers benefit
Coyote Springs 2, pictured above, is a natural gas
fired plant that generates electricity for customers.
The declining cost of natural gas also benefits electric customers through lower overall power supply costs. When it costs Avista less to purchase the natural gas we use to fuel our natural gas-fired generation plants, we can pass those savings onto you as well. In the general rate request we filed in Washington state
in April, due in part to declining natural gas prices, we proposed a one-year Energy Recovery Mechanism rebate to reflect the overall decrease in costs to generate electricity for Washington customers. Also, as part of our Idaho requests last week, we proposed a Power Cost Adjustment reduction
for our Idaho customers.
So whether you are an electric or natural gas customer of Avista (or both), you’re seeing the benefits of natural gas abundance and low prices, and you have been for some time. But what does it take to deliver natural gas to your home and provide the service to keep it safe and reliable, and how are the costs of the “the pipes and people” it takes to do that reflected in your natural gas rates? We’ll talk more about that in our next article, “Natural Gas Pricing 101, Part 3: Natural Gas Delivery and Your Bill."
Aug 06 , 2012
There’s not much better than a summer evening at a baseball game. If catching the Spokane Indians game on Saturday, Aug. 11, is in your plans, make sure to stop by the Avista booth to pick up information and reminders on the importance of requesting a free underground utility locate two days before starting any project – large or small - that involves digging. Call 811.
Providing information at the baseball game is one way Avista is joining with utilities across the country in promoting 811 awareness on Aug. 11, National 811 Day. Whether you’re a contractor or a do-it-yourself homeowner, knowing where underground utility lines are buried before you dig will help protect you from injury, prevent damages to utilities and service disruptions, and avoid potential fines and repair costs.
But, if you’re looking for cool indoor space, check out the 811 Call before You Dig information ad that is running before the latest blockbuster starts at Regal Cinemas and Village Center Theaters in our Washington and Idaho service area and at Tinseltown Cinemark in Medford, Oregon. The information ad is also part of our ongoing commitment to remind customers and contractors to stay safe and call 811 two days before installing a mailbox, planting a tree, building a deck or any other project that requires digging.
So before stepping on the shovel in your yard or starting up the backhoe, make sure to call 811 or go online at www.call811.com
to request a underground utility locate. It’s free, it’s easy and it’s the law.
Jul 30 , 2012
Avista customers see benefits of natural gas abundance
You’ve probably seen the headlines: “Natural gas prices fall to 10-year low,” or “Natural gas prices continue to drop.” But are these headlines really telling the whole story, and what do they mean to you as a natural gas customer of Avista? We’ve been talking about natural gas as a cleaner, more efficient and reliable source of energy for a long time now, but what about the economics of natural gas? How do new sources of natural gas affect wholesale costs, and how does that translate to your energy bill?
The good news is if you are an Avista customer, you have been seeing the benefits of increased natural gas supply and lower prices for some time. Through rate decreases proposed by Avista and approved by state regulators, Avista customers have seen the wholesale price of natural gas decrease by more than 48 percent since 2008.
But the relationship between headline-making wholesale prices and what you see on your bill each month is not always that clear cut. Over the next few weeks through this natural gas pricing series, we’ll discuss the cost components that make up a customer’s natural gas bill and try to clear it up a bit.
Natural gas bills include wholesale gas costs, interstate pipeline transportation costs and costs for equipment and people to get the natural gas to the customer
|There are three main drivers of your natural gas
energy bill: Whole sale gas costs; fixed
transportation costs; equipment and people.
Click to see the full chart.
There are three main drivers of your natural gas energy bill:
1. The cost of purchasing natural gas on the wholesale market is about 38 cents of every dollar you pay for natural gas. This cost is passed through to you without any mark-up or profit to Avista.
2. The cost to transport the natural gas on pipelines from the source or supply basins to Avista’s system is about 17 cents of every dollar you pay for natural gas. This cost is also passed through without any mark-up or profit to Avista.
3. The cost of the equipment and people it takes to safely and reliably deliver natural gas through our distribution system to your home or business is about 45 cents of every dollar you pay for natural gas. State regulators provide Avista the opportunity to earn a fair return, or profit, on the investment our shareholders have made in the facilities used to provide service to you.
You probably don’t think much about it when your gas furnace kicks on, or when you turn on your gas stove or use water that is heated with natural gas. But, like electricity, it’s taken a journey to get to you. Before we can deliver it to your home, Avista has to first purchase the natural gas and have it transported through large pipelines over long distances to our delivery system. The combined costs of purchasing and transporting natural gas to our system for delivery to you make up more than half of your natural gas bill. Avista doesn’t mark up these costs or make any money on this – customers pay what we pay.
When we purchase natural gas from the wholesale market, our goal is to secure reliable gas supply at the lowest cost so we can keep your costs as stable and low as possible.
Natural gas – grown at home
Natural gas is an abundant resource found throughout the United States and Canada. Since 2007, domestic natural gas production has increased, primarily due to the advances in natural gas drilling that have allowed production from previously untapped shale gas formations
throughout North America. The Energy Information Administration
now estimates that at today’s consumption levels there is enough natural gas to last the United States almost 100 years.
Avista is fortunate to be located near two prolific natural gas supply basins; the Western Canadian Sedimentary Basin, primarily located in Alberta and British Columbia, and the Rocky Mountain basin in Wyoming, Utah and Colorado. Not only is the North American natural gas resource base vast, the American Gas Association
describes it as “a home‐grown North American fuel whose efficient use by power plants, homes and businesses contributes to cleaner air.” Beyond the comfort and warmth it brings to our homes, natural gas is also recognized for its environmental attributes and contribution to American energy independence.
Wholesale prices are market driven
|Over the past decade, wholesale
natural gas prices have been volatile,
at times increasing sharply and then
dropping just as sharply.
Click to see full chart.
Natural gas is a commodity. Ultimately the cost is set by the market. As in most free markets, natural gas prices are primarily influenced by supply and demand. Over the past decade, wholesale natural gas prices have been volatile, at times increasing sharply and then dropping just as sharply. Factors that have contributed to the volatility of natural gas prices including supply, demand, severe weather events like Hurricanes Katrina and Rita in 2005, and access to shale natural gas supply.
Avista’s purchasing plans provide more stability and help keep costs low
Avista wants what our customers want: an adequate supply of natural gas at affordable prices. Our goal is to strike a balance of ensuring reliable supply at competitive prices for our customers, and stabilizing natural gas prices so our customers see fewer fluctuations in their energy bills. Our employees in natural gas purchasing work every day to do this in several ways:
• We purchase natural gas from the supply basins mentioned above. These purchases are a mix of fixed price long-term, medium-term, and near-term purchases, which allow us to lock in prices for the future, and purchases on the short term market (also called the “cash” or “spot” market).
• We secure capacity rights on six large pipelines to assure delivery of supply from the supply basins to Avista’s distribution system.
• We’re part owner of Jackson Prairie, an underground storage facility in Washington State, so we can purchase natural gas and store it until we need it. We often purchase natural gas during warm‐weather months, when it traditionally costs less, and store it for delivery to our customers for use on those cold winter days.
Our natural gas purchasing plans are reviewed and revised annually to reflect evolving market conditions. Sound purchasing practices and decades of experience have helped us keep costs lower and more stable for our customers. In fact, Avista is paying some of the lowest wholesale natural gas prices among our utility peers in the region. It means our customers have some of the lowest natural gas rates in the northwest.
We’re also thinking ahead. Periodically Avista updates our 20-year outlook, which looks at how we can meet our customers’ natural gas needs over the long term, in a reliable manner at the lowest cost. We call this our Integrated Resource Plan.
We updated it in 2009, and we are currently in the process of completing our 2012 plan, which will be available at the end of the year.
As we mentioned earlier in the article, the combined costs of purchasing and transporting natural gas to our system for delivery to you can be more than half of your natural gas bill. These costs can also affect your electric bill. In our next article, “Natural Gas Pricing 101, Part 2: Natural Gas Supply and Your Bill,” we’ll explain more about how, with approval by state regulators, we pass these costs directly through to customers.
Later, we’ll discuss the remaining portion of your natural gas bill. “Natural Gas Pricing 101, Part 3: Natural Gas Delivery and Your Bill” will explain how your energy rates are also driven by the rising costs of the equipment and people it takes to get natural gas to your home safely and reliably.
Jul 19 , 2012
Avista equips first responders with electric and natural gas safety training
To ensure the safety of our customers, employees and the public, Avista works closely with local firefighters, police and other first responders so we are all prepared to take action when called upon.
This work includes coordinating with other first responders in emergencies, mock accident training and basic electric and natural gas training.
Last month, the City of Spokane SWAT Team came to Avista to learn a little electric and natural gas 101, as well as how to disconnect electric and gas meters in an emergency situation.
The Spokane SWAT Team supports the Spokane Police Department with tactical response to critical incidents, such as hostage, barricade, or sniper situations. One of their objectives during an incident is to make the area safe. This includes eliminating the perpetrator’s ability to misuse electricity or natural gas to harm or threaten the safety of others.
“If there are potential electric or natural gas hazards, we always encourage first responders to contact us first,” said Bill Baker, Avista gas training and codes coordinator. “If they have to act at that moment, we’ve ensured they have the proper training to defuse a potentially volatile situation with electricity or natural gas.”
Baker, along with Natural Gas Foreman Dan Gigler taught the class of 30 SWAT team members how to pull an electric meter, how to turn off the gas meter and the importance of wearing safety equipment in the process.
First responders often put their lives on the line to ensure the public’s safety. Avista’s gas and electric servicemen and women, also first responders, ensure the public’s safety by making a situation safe from any potential electric or natural gas dangers.
Safety for everyone is always top of mind every day that we work to deliver energy to your homes and businesses. The training and partnership with other first responders is just one of the many examples of our commitment to your safety.
Jul 02 , 2012
Natural gas rates were lowered 6.4% in Wash., 6% in Idaho in March
But lower wholesale natural gas costs have added challenges to offering energy efficiency rebates and incentives to our customers in Washington and Idaho, making the programs no longer cost effective. It costs more to provide natural gas energy efficiency rebates and incentives than it costs for the natural gas that customers use.
That’s why Avista has requested to suspend the natural gas programs in Washington and Idaho effective September 1. If the utility commissions in the two states approve the requests, customers would still have time to get their rebate and incentive forms to Avista.
Jun 19 , 2012
Post by Brandi Smith
Standing in front of an old wood panel wall filled with items such as old smashed-up lunch pails, hot sticks, pole climbing gear, chew cans, and painted plaques, engraved and taped with names, nicknames and years of service entices many questions for those who walk the halls of Avista’s Lewiston/Clarkston construction office.
This particular lunch pail proved difficult
to smash...even with a line truck.
It is rumored that it had to be run over
three or four times before
it finally caved.
The tradition of hanging up an item of significance upon retirement began in the early 1950s. Back then, metal lunch pails were pretty common, and on an employee’s last day, they would back a line truck over the lunch pail, smashing it in honor of their years of service. It is rumored that one lunch pail proved particularly difficult to smash and had to be run over three or four times.
Over the years, the items hung on the wall shifted from lunch pails to other possessions of significance. It’s a menagerie of objects contributed from lineman, gas servicemen and even folks from the Clarkston Water Department.
The wall of fame, as they call it, represents more than years of service. It represents pride and years of hard, physically demanding work with an intangible reward – the lights are back on and the gas is flowing. Customers have the energy they need to power their lives.
If the wall could talk, we could all enjoy hearing the stories from the lineman who just retired after 35 years of service or the gas serviceman who began his career in the late 1950s, back when gas was new to the area. The wall of fame will occasionally get visits from the public wanting to see their friend or family member’s symbol of a lifetime of hard work.
A visit to the office also begs the question. What item represents you upon your retirement? Something to think about.
Jun 08 , 2012
Safety is a family affair in Oregon
Avista’s commitment to safety extends beyond our workday and jobsite – all the way down to our grandkids. Last Saturday Avista’s Eddie Randles recruited his 7-year-old granddaughter Arianna to help at Safety Saturday at the Rogue Valley Mall in Medford, Oregon.
Randles started the day with a Tailboard Meeting – just like employees who go out into the field to fix gas leaks or build new pipelines. (That’s her focused, arms-crossed look in the picture.) The detailed briefing taught Arianna all of the natural gas display items for the event and how they work.
“She even installed my pressure gauge build-up on the gas meter and found a leak with the Rover,” Randles said. “She was so versed in the different parts of the meter she was able to describe it to the Red Cross gentleman [see photo].”
The event was free and open to the public. Dozens of organizations provided information and exhibits, from document spreading to fire prevention to electric and gas safety.
Thanks Eddie and Arianna for going the extra mile for safety!
May 30 , 2012
Over the past few years, we’ve heard from our customers and employees that they want more information on how we do business in areas like utility operations, environmental stewardship and our community impact. We’re glad you asked!
That information and more is available in our fourth annual report on our performance, “Together We Will Build Shared Value,”
now online at avistautilities.com.
Our primary mission is to provide the energy you need for your life. The back story is all about what goes into providing that energy and how often this has additional benefits to the customers and communities we serve. That’s shared value.
In this year’s report, we tell many stories of how shared value is created throughout our business. For example, in the Utility Operations section we talk about how Avista must meet state-mandated energy savings targets. As part of our sustainable business practices, the report is published online
We’ve made PDF files available of the entire report and four of its sections for your convenience in sharing the report with others.
Shared value is at the heart of what Avista does every day. We hope you’ll take the time to read this year’s report and give us your feedback
. We want to hear from you about how – together – we can continue to build shared value.
May 23 , 2012
Post By Brandi Smith
The 811 Call Before You Dig, Damage Prevention Bike made its way through Spokane on May 18 and 19 to help us spread the word about the importance of calling 811 before you dig. The custom chopper revved up a lot of attention as Avista, in partnership with One Call Concepts and the Inland Empire Utility Coordinating Council featured the bike at three important community events. The Spokane Shock game on Friday night (congrats Shock on a nice win!), the Lilac Festival Annual Car Show and the Torch Light Parade in downtown Spokane on Saturday night.
One Call Concepts, Inc. commissioned Paul Jr. Designs to build the 811 Bike to help promote awareness of the importance of preventing damage to underground facilities. In 2011, for every 1,000 utility locates performed in Avista’s service territory, 7.9 instances of utilities being dug into occurred. This is much higher than the national average, which is 3.7 per 1,000 utility locates. Avista’s goal is to reduce the amount of dig-ins to our underground lines by 10 percent. Help us continue to spread the word about the importance of calling 811 before you dig.