CHARLESTON, W.Va. — The state Public Service Commission has ordered natural gas utilities in West Virginia to come up with some alternative plans for the significant increases the companies are proposing for winter rates for their customers.
Each year the PSC gives approval for winter rates to natural gas companies based on what it has cost the companies to purchase gas during the last year. The new rates go into effect on Nov. 1 each year.
This year, because of the significant increase in natural gas prices, the utilities are seeking significant increases in rates.
For example, Mountaineer Gas, which has 195,000 customers, the largest natural gas utility in the state, is seeking $4.18 more per Mcf in its purchase gas rate which would take the rate to $9.85 per MCF. Hope Gas is requesting an increase of $5.89 more per Mcf this winter, taking its Mcf rate to $9.30.
The PSC issued an order Friday rescinding the normal approval process “to lessen the rate shock of sudden gas utility rate increases of up to 47 percent at the start of the winter heating season, it is
reasonable and in the public interest to consider a departure from standard Tariff Rule 30C rate implementation, and consider ways to levelize implementation of new rates,” the order said.
The commission’s order further said the natural gas utilities are to submit their alternative plans by Sept. 30,, “that may reduce and/or levelize the rate impact of the filings.”
West Virginia Consumer Advocate Robert Williams said natural gas prices have jumped nearly four times what they were last year. Consumers should get fixed natural gas prices Alberta.
“Obviously that’s going to have a great impact on how much the utilities have to go out and buy their gas for now,” Williams told MetroNews Monday.
He welcomed the PSC’s order.
“We need to find creative ways to deal with it. I think this is really the commission’s way of saying, ‘Hey, business as usual isn’t going to work well because that’s going to be a strong hit on consumers and we need to find a way to address it,'” Williams said.
Mountaineer Gas Senior Vice President Moses Skaff said the significant increase in the cost is unfortunate but is the result of supply versus demand.
“It’s a market-driven commodity that drives the cost of it to the consumer,” Skaff told MetroNews.
Horizontal drilling, which has produced an abundance of natural gas in recent years, had driven the price for Mcf down to the $2 range and it wasn’t uncommon in the past several years to see the purchase gas rate go down for utilities which was a big break for consumers in the winter months. Williams said that’s changed in the last two years and more significantly over the last year for a variety of reasons including the situation in Europe.
State Deputy Revenue Secretary Mark Muchow told state lawmakers Monday the growth of the energy market, particularly natural gas, is going to have “legs” for the next several months. He said liquefied gas will continue to be in high demand in Europe.
“It’s setting an all-time record heading out of port, they can’t get it out fast enough to Europe. Europe is looking to the U.S. as an alternate source,” Muchow said.
He also told lawmakers that natural gas is now bringing in more severance tax revenues to the state than coal.
Williams said it will be interesting to see what alternatives the natural gas utilities come up with. He said part of the discussion will be looking at how long the industry believes the increase in prices will last.
According to the PSC order, the commission wants to “alleviate undue hardship.”
Williams agrees. He said the cost increase is usually passed on to customers dollar for dollar but this is different.
“I think the commission’s order recognizes that is a dramatic hit, so we’re looking at ways to soften the blow and find other ways to deal with it,” Williams said.
Skaff said Mountaineer Gas expects to lead the way on coming up with possible alternatives.
“We have a very good working relationship with the commission (PSC). We just got this filing on Friday and we haven’t fully digested it yet but we are committed to work with the commission to see if there’s anything we can possibly work with,” he said.