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Natural Gas Pricing 101, Part 3: natural gas delivery and your bill   

Tags: Avista Utilities, Natural Gas, Rates

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.

Click to enlarge
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)
Click 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
Natural Gas Pricing 101, Part 1: Wholesale Prices
Natural Gas Pricing 101, Part 2: Natural gas supply and your bill
Natural Gas Pricing 101, Part 3: Natural gas delivery and your bill
Posted by  System Account  on  8/16/2012
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