This winter’s weather may be unpredictable, but we can expect some stability in the cost of natural gas delivered to homes and business. As the Pacific Northwest prepares for another cold and wet La Niña winter, natural gas customers can expect prices to remain stable due to a slower than expected economic recovery, increased supply and successful conservation efforts.
Northwest Natural Gas customers will see some relief in the form of lower gas prices. New rates went into effect Nov. 1 after the state Utilities and Transportation Commission approved the company’s request to lower rates by 2 percent. This is the second year in a row that NWNG customers have seen a decrease. NWNG serves more than 61,000 residential customers and more than 5,000 commercial customers in Southwest Washington.
Natural gas companies are required to adjust their rates at least every 15 months to reflect the increasing or decreasing cost of purchasing the gas. This is called a Purchased Gas Cost Adjustment or PGA. The total cost of gas is passed directly to customers and the company is not allowed to earn a profit on it. Requiring natural gas companies to stay on top of price fluctuations through the regular PGA process is efficient and benefits customers by creating more immediate decreases in their rates when natural gas prices go down. Likewise, if prices begin to rise in the future, increases should be more incremental.
Take a look at your natural gas bill. If you are a NWNG residential customer using an average of 58 therms a month, you will see savings of about $1.51 a month from the recent rate decrease. The typical business customer using 257 therms a month will see a drop of approximately $6.36 a month. Two-thirds of your monthly bill can be attributed to the cost of natural gas. The remaining one-third is all about getting the natural gas to you. NWNG has almost 70,000 customers in Southwest Washington and thousands of miles of pipeline mains and smaller service lines. “Getting the natural gas to you” includes maintenance and inspection of NWNG’s pipelines and administrative costs such as billing.
Why has the cost of natural gas dropped?
The slow economic recovery has a broader impact on energy prices than many people realize. In the short term, it affects all natural gas customers. Demand remains low from residential customers who are conserving energy to save money. Consumers buy fewer goods, and subsequently the demand for natural gas by commercial and industrial customers stays low. This contributes to keeping wholesale costs low.
Increased supply is another factor affecting gas prices. Natural gas is the largest source of home heating in the United States. In Washington, 39 percent of residents use it as their main heat supply. New technologies mean getting natural gas out of the ground is cheaper and easier. More is being produced; however, although natural gas consumption is expected to grow by 1.7 percent by the end of this year, demand hasn’t caught up to the increased supply.
Typically, economic growth increases energy consumption. As the economy gains strength, an upward trend in gas prices is likely. However, consumers are incorporating conservation into their daily lives, for example: setting the thermostat to 68 F and the water heater to 120 F, and turning temperatures down at night and when nobody is home. Many are taking further steps by sealing drafty exterior doors and windows with caulking or weather-stripping, upgrading insulation and installing high-efficiency windows. This reduces energy loss and increases savings on your bill.
NWNG customers now also have access to cash incentives for energy savings at www.energytrust.org/washington. If we keep up our efforts to conserve and improve our energy efficiency as the economy recovers and natural gas prices fluctuate in the future, we will be better prepared to respond to those changes.
Both the weather and the economy can be unpredictable. As we prepare for another chilly Pacific Northwest winter, if we keep up our conservation and energy-efficiency efforts, at least we shouldn’t have to brace ourselves to open the gas bill.
Jeffrey Goltz is chairman of the Utilities and Transportation Commission, the state agency charged with regulating private, investor-owned utilities in Washington.