Philadelphia-based PECO said it will decrease its natural gas rate by nearly 11%, effective Sept. 1, returning prices to levels prior to Hurricane Katrina a year ago. PECO serves 474,000 suburban customers in southeastern Pennsylvania.
Under the decrease, PECO’s gas rate will drop from $1.45 per hundred cubic feet (ccf) to $1.29/ccf, reflecting lower wholesale gas supply costs. The reduced rate will mean savings of about $15 a month for the typical residential customer using 80 to 100 ccf, and more for larger users. The new rate is now 21% lower than last December ($1.65/ccf) when rates reflected the sharply increased wholesale prices following Katrina and Hurricane Rita in the Gulf of Mexico.
“Our goal in buying natural gas for our customers is to make sure they get the best possible price and to protect them from the up-and-down volatility that can occur in the wholesale market,” said Reed Horting, PECO vice president, gas. “We understand how higher energy costs impact our consumers, and we are pleased we could pass along these lower prices.”
PECO said it is uncertain whether its natural gas rate will change next quarter. The utility is permitted under state regulation to adjust rates only quarterly depending on variations in wholesale commodity and related supply costs. Market conditions will be mostly dependent on weather, use of natural gas for power generation nationally, gas production, and gas available in storage reserves.
PECO’s natural gas rates are made up of two parts — a delivery charge and a commodity charge. The 28 cents/ccf delivery charge has not changed since 1988 and reflects PECO’s natural gas operating and maintenance costs, mainly the cost of moving gas from the interstate pipelines to individual users. The gas commodity charge is the part of the bill that will drop on Sept. 1 and reflects only the cost PECO pays to secure natural gas on behalf of customers without any markup. This charge represents about 80% of the total rate and is a “direct pass through” of the company’s purchased gas costs.
Horting said PECO’s priority is to buy gas in a variety of ways to provide customers with the most competitive commodity price. The company has a diversified supply portfolio and does not purchase large quantities of gas on the spot market. “Buying gas during the off-season, investing in storage facilities, and hedging on costs help us pass along the most competitive prices available,” he said.
After the milder winter last year, PECO still has substantial amounts of gas in storage with its two local peaking plants at high capacity and underground storage at greater than 80% of capacity.
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