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Great Western Gas Rate Reduction Stampede Hits Four States

May 25, 2009
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Although wholesale natural gas prices increased month-over-month for the first time this year, June retail gas bills in Colorado, Idaho, Oregon and Washington will plunge again based on separate utility filings in those states that rang some familiar bells.

For Minneapolis-based Xcel Energy's Colorado utility gas customers, June bills will be 30% lower than they were in the same month last year and they will drop 17% from their current levels in May.

Also in Colorado, South Dakota-based Black Hills Corp.'s utility has proposed reducing its retail natural gas rates in the area around Colorado Springs, CO, by nearly $20/month for some residential customers. Black Hills Energy has asked state regulators to make the reduction effective June 1 as did each of the other utilities.

Spokane, WA-based Avista Utilities on Tuesday asked regulators in the states of Washington and Idaho to lower natural gas prices in their states by 8.1% and 6.7%, respectively. If approved, this would be the second gas price drop for Avista customers in the two states this year.

In response to Northwest Natural Gas Corp.'s proposal, the Oregon Public Utility Commission (PUC) last Tuesday ordered a $32 million refund to the Portland-based Northwest Natural's customers through a one-time refund and a 3.4% drop in their monthly gas utility rates. Northwest Natural was overcollected for bulk gas purchases for the five-month heating season period (Nov.1, 2008-March 31, 2009), the PUC said in taking the action.

Xcel told the Colorado's Public Utilities Commission last Monday that the commodity cost of gas would increase 39% in June (to 40.1 cents/therm from 28.9 cents/therm). The new price is still less than half of what it was in last June when the commodity rate was 93.09 cents/therm, Xcel said.

Despite a higher therm price on a month-to-month basis, typical residential customers are expected to decrease use by 43% in June, compared to their use this month, the utility said. "Overall bills would decrease to $21.26, based on projected use of 17.8 therms. This compares to bills in May of $25.53, on projected use of 31 therms."

Xcel said warmer weather is expected to drive a 35% decrease in use in June for typical small-business customers when compared to May. Bills would decrease 17% to $93.91, based on projected use of 116.5 therms. Bills this month were expected to be $113.09, on use of 179.7 therms.

The New York Mercantile Exchange (Nymex) Henry Hub price "had been fairly stable or falling slowly throughout the months of March and most of April 2009 but began rising in the last week of April, eventually climbing about 19% higher, to $4.30/Dth," Xcel said.

"The increase in Nymex prices seemed to be the expression of an industry sentiment that envisions higher demand as the current economic recession moderates, especially by commercial and manufacturing customers. During the past month, the Colorado gas basis narrowed another 50-85 cents/Dth, netting $3.46/Dth in the Rocky Mountain region."

Black Hills is seeking its second retail gas rate reduction this year after reducing charges in February resulting in an average decline in residential bills of about $27/month and $109 for commercial customers. Subsequently, though, the utility raised gas rates in April to cover operating cost increases other than the cost of wholesale gas supplies. The increase ranged from $1.76 to $2.83 monthly for residential and commercial customers, respectively.

Colorado regulators authorized the higher rates and the first change in the customer service charge for years on April 1. Later that month, Black Hills Energy reported that its cost of wholesale gas supplies hit a seven-year low, and it announced future gas rate decreases this year.

In Oregon, Northwest Natural had filed with the PUC for the customer refund, and the regulators last Wednesday took great pains in a written statement to acknowledge that the gas utility should be lauded for coming forward before it legally had to do so.

In the statement, PUC Chairman Lee Beyer said the regulators' decision should in no way be viewed as the company "doing anything improper; in fact, nothing could be further from the truth. Northwest Natural has been aggressive in saving dollars for its customers, and by law the company could have waited until November to pass those savings back to its customers. Instead, [the utility] was proactive and came to the commission seeking to refund these savings now."

PUC analyst Ken Zimmerman said the price drop resulted from a massive increase in domestic U.S. gas supplies -- mostly from unconventional drilling and a substantial decrease in demand due to the economic recession and improved energy efficiency.

"Prices are expected to rise if the summer is warmer than normal due to increased demand for gas-fired electric generation for air conditioning or winter is colder than normal," Zimmerman said. "But prices are expected to remain below what we saw in mid-2008."

Oregon regulators noted that last summer U.S. natural gas prices hit an all-time high due to an increase in demand and widespread worries about future domestic supply availability. Since that time, wholesale gas prices have dropped to nearly half that peak.

In Washington and Idaho, Avista officials indicated that later this year the utility could be filing for additional gas rate decreases unless there is a wholesale gas price spike during the summer.

Avista said if the latest decrease is approved by the Washington Utilities and Transportation Commission (WUTC), an average residential customers would see a little more than a $7 monthly decrease, or 8.1%. If the Idaho Public Utilities Commission (PUC) also approves the change, customers would have a decrease of about $5.26/month, or 6.7%. Avista serves 146,000 gas utility customers in Washington and another 73,000 in Idaho.

WCTU-regulated customers earlier got a 3% decrease, while Idaho gas users had a 4.7% decrease, both in January.

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