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LDCs Quickly File to Reduce Jan. Rates to Match Falling Gas Prices

Local distribution companies (LDC) in several states filed emergency petitions with state commissions at the end of 2005, dropping benchmark gas rates for January by as much as $2.00/dth following the recent precipitous decline in futures and wholesale cash prices over the last two weeks.

The warming trend that covered much of the country, particularly the populous East, fueled the decline from the mid-December high for the Nymex January futures contract of $15.780 to its expiration on Wednesday, Dec. 28 at $11.431/ MMBtu, a 28% drop.

Following up on the wholesale price decline, Columbia Gas of Ohio and Dominion East Ohio, both sought waivers Dec. 28 from the Public Utilities Commission of Ohio (PUCO) to make quick changes in their prices to customers before the start of the month's deliveries. And LDCs Public Service Co. of North Carolina (PSNC) and Piedmont Natural Gas Co. both jumped in on the 29th with requests to their state regulators to drop their gas commodity benchmark prices as of Jan. 1 to reflect the lower gas prices.

PUCO approved a waiver of its 14-day notice period for Columbia Gas to file a revision to its previously estimated $15.678/Mcf rate for the period running from Dec. 30, 2005 through Jan. 29, 2006, dropping that rate more than $2.00/Mcf to $13.6149/Mcf. Columbia had originally filed its proposed January rate on Dec. 16 (The January futures $15.780 high was on Dec. 13). The January Columbia rate still will be almost 75 cents higher than the $12.8659/Mcf for December.

Dominion East Ohio asked for a waiver of PUCO rules to file revised January gas cost recovery (GCR) rates, which are a dollar-for-dollar pass-through of prudent gas costs. Dominion filed to drop its originally estimated rate of $14.876/Mcf for the period Jan. 6, 2006 through Feb. 6 to $13.279/Mcf. The company made its initial January filing Dec. 22. The new rates still will mean a slight increase from Dominion's December GCR rate of $13.024/Mcf.

It was noted that the purchased gas cost recovery mechanism does not necessarily represent the utility's exact cost of gas for the scheduled month since it also can include amounts for refunds or undercollections for previous months.

"We monitor the natural gas futures market constantly," said Tom Hauck, a Columbia Gas of Ohio spokesman. "You have to in today's market. As a result, we were able to work with the commission to get permission to revise our rates, which we did at basically the last minute. We are trying to reflect for our customers the most current price."

Despite the drop in rates, consumers in Ohio are still not out of the woods. According to the Columbus Dispatch, January bills for Columbia Gas of Ohio customers will still be 31% higher than they were during January of 2005.

Farther south, Piedmont Natural Gas said it is working with the utility commissions in North Carolina, South Carolina and Tennessee to receive expedited approval to lower its rates for natural gas service, effective Jan. 1 to drop its benchmark from $13/dth to $11/dth "based on significant volatility in the commodity market and a precipitous drop in the wholesale closing price of gas for the month of January, 2006 in the last two days." The company warned customers, however, "even with the recent decline, wholesale gas costs are still more than double those of one year ago and remain volatile."

And PSNC filed with the North Carolina Utilities Commission to drop its benchmark price from the $12.75/dth estimated in mid-December for the month of January to $10.75/dth. The company noted the "unanticipated decrease in the current market price of gas."

PSNC's main contracts are tied to the first of the month trade publication indexes, plus or minus, and while those were not due to come out until Jan. 1, they are influenced by daily spot market prices, which have been dropping even more than futures, and the Nymex closing price for the month. The Jan. 1 index sets the price for the bulk of the LDC's gas for the month of January.

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