Natural gas rates are down, but why?   

Tags: Natural Gas, Rates

If you’re an Avista natural gas customer in Idaho and Washington the price you pay for natural gas went down Monday. Effective June 1, the utility commissions in both states approved our request to decrease natural gas rates. 8.1% in Washington 6.7% in Idaho. Oregon customer rates were not changed. Natural gas rates in Oregon went down 4.1% in November 2008. 
 
The decrease is because the cost we pay for wholesale natural gas has continued to go down. Normally, we’d ask for this type of rate adjustment in the fall, but we know times are tough and so getting you a lower rate sooner is more important than ever. This is the second decrease in rates this year – the other came in January when we were all buried in snow.
 
Because Avista is a regulated utility, we can’t simply raise or lower rates at anytime. We file requests with the utility commissions who review our proposals, hold hearings, listen to your comments and in the end, set our rates and profits that are reasonable and fair.
 
Here’s where it gets tricky. Imagine if your local gas station had to determine what price it would charge for the entire year, about 11 months prior. They’d gain or lose money along the way, while customers continued to pay the same price.
 
We basically do the same thing with natural gas, but typically in the fall, we file a Purchase Gas Adjustment (PGA) with the commissions to true-up the costs. This means that you pay what we pay – which is the best price we can secure on the market.
 
The two recent rate decreases were an early true-up of your rates. We have a lot more detail on this subject here. 
 
Are there any questions about natural gas or anything else that we can answer? Contact us here and let us know.
 
 
 
Posted by  System Account  on  6/4/2009
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Comments


Stan G  commented on  Tuesday, August 18, 2009  10:32 PM 
I do appreciate the 11% reduction but according to the energy information association, well head prices for natural gas are down almost 60% from a year ago.


Dan K  commented on  Tuesday, August 18, 2009  10:32 PM 
Stan,
You’re right; the wholesale natural gas market doesn’t exactly mirror what you pay in rates. Here’s why: The lowest cost on a trading market can never be predicted in advance, so companies hedge their buys to round out the lowest reasonable price in an attempt to smooth out the volatility of the wholesale markets for their customers and unique circumstances. We buy our gas for the winter in advance (this is an oversimplification for sure) because prices tend to be higher when demand is higher. The rate decreases so far this year in Washington and Idaho are both paying for gas that has been purchased and will be purchased in the future for a period of time. If market conditions continue to decline, you may just see another rate decrease in the fall as well.
Thanks,

Dan
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