HomeMy WebLinkAboutgas.pdfAnnual Report 2008
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Idaho Natural Gas Utilities
Idaho’s gas companies are allowed to only earn a profit for delivering natural gas to
consumers and not on the commodity of natural gas itself. Therefore, the customer is
only paying what the gas company paid for the commodity. The commission normally
passes on increases or decreases to customers in the form of a Purchased Gas
Adjustment (PGA).
Idaho is part of the larger, integrated North American natural gas market. With new
infrastructure, other regions now have improved access to the production areas that
Idaho typically depends upon – Rockies and Western Canada.Consequently, the
Northwest will face increased competition for existing natural gas supplies.
The role of natural gas in addressing climate change was addressed in an article by the
Northwest Gas Association: “The region (Northwest) must retain and secure additional
access to abundant and diverse sources of supply as climate change policies increase
regional demand for natural gas. It must also ensure that the associated transmission,
storage and distribution infrastructure can grow as necessary.”
Over the last 15 years, more than 90 percent of new electrical generating capacity built
in the United States uses natural gas. The projected path of total natural gas
consumption depends almost entirely on the amount consumed in the electric power
sector. And, according to the Energy Information Administration, the increased use of
natural gas has helped reduce the level of greenhouse gas emissions. U.S. natural gas
resources are estimated at 1,258 trillion cubic feet, which, at current usage levels,
should last about 60 years.
Crude oil prices and electricity affect both the demand for and price of natural gas. In
the Northwest, a good portion of electricity is produced using natural gas. Wholesale
natural gas prices typically have some fluctuation, however according to a recent article
published by the Northwest Gas Association, which says gas prices “have become
among the most volatile of traded commodities.” When explaining the factors
influencing the significant increase in this summer prices, NWGA mentioned the new
pipelines that have been built, “resulting in greater integration of these supply
resources to other North American market regions”, and the linkages between fuels
where “...large industrial consumers, including some electrical generation facilities, can
burn either fuel and make the most economic choice based on the price of the fuel and
such factors as emissions, maintenance costs, etc.”
Other concurrent factors mentioned by Idaho gas utilities in explaining the summer’s
significant price fluctuations included: 1) last winter’s use due to colder than normal
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temperatures dropped storage levels; 2) a forecasted worse than average hurricane
season caused supply speculation; 3) higher than normal international LNG (Liquid
Natural Gas) demand; 4) Independence Hub, which typically produces about 1 BCF per
day went offline for repair; 5) demand speculation caused by the completion of a
Midwest flowing pipeline; and 6) industry wide industrial demand increased by 3.7
percent in parallel with exports as the dollar devalued relative to other currencies.
Recently spot natural gas prices at trading locations across the country have tumbled
amid concerns over the economic condition. This may limit industrial demand in the
near term, and provide the perception of a healthy supply picture given the strong
underground storage levels for heating demand this winter.
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Individual Utility Statistics
(As of the most recent FERC filing)
Intermountain Gas Company
Residential Commercial Industrial Transportation Total
Customers 264,201 28,099 6 106 292,412
% of Total 90.35 9.60 0.002 0.036 100
Therms (millions) 192.3 96.9 2.7 213.9 505.8
% of Total 38.02 19.16 0.53 42.29 100
Revenue (millions) $216.2 $101.7 $2.3 $9.4 $329.6
% of Total 65.59 30.86 0.70 2.85 100
Avista Utilities
Residential Commercial Industrial Transportation Total
Customers 62,345 7,858 100 9 70,312
% of Total 88.67 11.18 0.14 0.01 100
Therms (millions) 44.6 25.1 2.1 45.7 117.5
% of Total 37.96 21.36 1.79 38.89 100
Revenue (millions) $54.5 $28.2 $2.2 $0.8 $85.7
% of Total 63.59 32.91 2.57 0.93 100
Questar Gas
Residential Commercial Industrial Transportation Total
Customers 1,653 217 1 0 1,871
% of Total 88.35 11.60 0.05 0 100
Therms (millions) 114.5 59.3 5.5 0 179.3
% of Total 63.87 33.08 3.07 0 100
Revenue (millions) $984.1 $480.5 $36.8 $0 $1501.4
% of Total 65.55 32.00 2.45 0 100
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October 1, 2008
Case No. INT‐G‐08‐03
Wholesale market prices force increase in gas supply surcharge
After two years of receiving credits, customers of Intermountain Gas will this year pay a
surcharge on their gas bills as a result of increasing worldwide demand for energy and
production constraints that contributed to energy prices hitting record highs over the
past year.
The surcharge, effective Oct. 1, increases the gas supply portion of Intermountain Gas
rates from 63.6 cents per therm to about 78.5 cents per therm. For an average
residential customer who uses natural gas for space heating only, the proposed one‐
year increase is about $7.90 per month, or about 15 percent. For residential customers
who use natural gas for space and water heating, the increase is about $12.30 per
month or about 18 percent. Commercial customers’ bills will increase by about $55.30
per month, or 18 percent.
The surcharge increases the company’s annual revenue by $54.3 million. None of that
revenue can go to increase company profits. Revenues from the surcharge are kept in a
deferred account, audited by the commission, and are used only to meet gas supply and
related expenses, including transportation and storage.
Every year on Oct. 1, gas rates are adjusted either downward or upward through the
Purchased Gas Cost Adjustment (PGA) process to account for the always‐fluctuating
wholesale prices for natural gas. When wholesale gas prices are lower than anticipated,
customers get a credit. When they are higher, customers get a surcharge. In 2007,
Intermountain Gas customers got an 8 percent PGA decrease. In 2006, customers got
a 4 percent decrease. However, during the last year wholesale gas market prices
have soared to levels not seen since Hurricanes Rita and Katrina in 2005.
Although natural gas prices have declined in recent months, prices remain above levels
at this time a year ago. If prices materially deviate from the 78.5 cents per therm
approved by the commission, Intermountain Gas will file an application to adjust rates
accordingly.
“Wholesale natural gas prices fluctuate, and recently have become quite volatile,” the
commission said. It directed Intermountain Gas to work with commission staff to
explore the creation of a low‐income weatherization program for residences heated
using natural gas. Intermountain Gas, with other utilities, will also be participating in
commission‐sponsored energy affordability workshops planned this fall.
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November 13, 2008
Case No. INT‐G‐08‐04
Declining wholesale gas prices lead to reduced PGA increase
About half the increase passed on to customers of Intermountain Gas on Oct. 1, will be
eliminated effective Nov. 15. Declining prices in the natural gas wholesale market led
Intermountain Gas to file an application with the commission seeking a reduction in its
annual Purchased Gas Cost Adjustment (PGA).
The commission approved the reduction in the gas cost portion of customers’ bills –
from 78.5 cents per therm to 67.5 cents per therm – and made the reduced rate
effective for Nov. 15, rather than the company’s requested Dec. 1 date.
The PGA surcharge, adjusted every Oct. 1, increased the average bill of a residential
customer who uses natural gas for both space and water heating by about $12.30 per
month, or 18 percent. The Nov. 15 reduction reduces that increase to about $7.41 per
month, or 9.22 percent. For a residential customer who uses natural gas for space
heating only, the Oct. 1 increase raised an average monthly bill by $7.90 or 15 percent.
The Nov. 15 adjustment lowers that increase to $5.18 per month, or 8.5 percent.
Commercial rates also increased by 18 percent on Oct. 1, or about $55.30 per month.
But the Nov. 15 adjustment reduces that increase to 9.7 percent, or about $34.63 per
month.
“Wholesale natural gas prices have continued to fluctuate dramatically,” the
commission said. “Intermountain Gas pursues a gas supply and risk management
program designed to mitigate the adverse impact that significant price movements in
the natural gas commodity can have on the company’s supplies, customers and other
operations. We commend Intermountain Gas for taking advantage of lower prices when
the opportunity arises within its established risk management policy.”
The commission staff investigating the case compared the gas supply cost requested by
Intermountain to the NYMEX Futures Index, Global Insights Forecast and the Energy
Information Administration’s outlook. Commission staff said that while the company’s
forecast is “somewhat optimistic,” the estimates are reasonable.
In 2007, Intermountain Gas customers got an 8 percent PGA decrease. In 2006,
customers got a 4 percent decrease.