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Natural Gas Rates for Customers
 
May 2006 G-150-1

Where does Washington State’s natural-gas supply come from?
About half of Washington’s natural-gas supplies come from Alberta and British Columbia provinces in Canada and the other half from Rocky Mountain production sites such as Wyoming.

How are natural-gas rates determined?
The two basic components in the cost of your natural-gas service are:
· delivering the gas to your house
· the natural gas

The cost of delivering or distributing the natural gas includes maintaining pipes and meters, billing customers and allowing a reasonable level of profit for the company’s investment in its network of pipelines. The commission reviews each utility’s request for higher rates. Your utility cannot make a profit on the gas-supply portion of your bill.

Your utility purchases its gas supply through an unregulated wholesale-commodity market, using a mix of long-term and short-term contracts with independent suppliers. The price you pay for natural gas reflects what your company actually pays for the fuel.

The commission uses a process called the Purchased Gas Cost Adjustment (PGA) mechanism to keep track of how much utilities spend on acquiring natural-gas supplies. The first part of the process involves the company looking forward and establishing the best projection for the price of natural gas in the upcoming year. The second part of the process looks back and trues up any difference between the projection and actual price. Customers receive a credit if the PGA collected too much from customers. If not enough money is collected, a surcharge is applied to your energy bill.

Why does the cost of natural gas increase?
The main factor driving up wholesale natural-gas costs is increased demand. More people are using natural gas to heat their homes. Natural gas is used to generate electricity. New pipelines have opened, making it easier to transport Canadian gas to the Midwest where demand is very high. The competing factors for natural gas drive up prices. When natural-gas supplies exceed demand, wholesale prices decline.

Typically, spring is the time when demand for natural gas is low and utilities can restock underground storage tanks with cheaper fuel to prepare for the higher usage when winter temperatures drop.

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