Consumers always welcome news about price reductions.
With the winter heating season upon us, they’ll get to keep a bit more of their money over the coming months. Dominion Hope and Equitable Gas Co., which serve customers in North Central West Virginia, have both reduced their rates because of lower prices for natural gas.
Dominion Hope spokesman Bob Fulton pointed out that the company goes out into the market to buy natural gas for its customers and charges them the purchase price of the gas.
Because the price of gas has dropped over the past year, Dominion applied to the Public Service Commission in West Virginia for a rate reduction, which was granted. The 28 percent decrease took effect Nov. 1. This is the second rate reduction that has taken effect this year, following a 14 percent decrease in July.
Equitable spokesman Scott Waitlevertch said residential customers will be getting about a $37 decrease in gas costs in their monthly bill — effective Nov. 1 — because of the reduction in the commodity’s price.
However, customers won’t get as much net savings because of a tariff that Equitable Gas filed with the PSC of West Virginia on Oct. 28. The proposal is to change the rates for all West Virginia customers by an increase of approximately 16.2 percent. This rate increase involves the cost of the improvements Equitable is making in West Virginia and the fact that the cost of delivering gas to customers has gone up.
“The actual cost of gas, if it remains low, (customers) will continue to see savings,” Waitlevertch said, “but when you factor in the other adjustment on the delivery end of things, it won’t be as much.”
The American Gas Association reports that “local natural gas utilities do not earn a penny of profit from price increases of natural gas supplies. The price they pay for natural gas is the price they charge customers. Local natural gas utilities provide a delivery service at rates set by government regulators based on the cost of operating the delivery system. The delivery system rate is combined with the price of the natural gas supplies to determine a customer’s bill. Local natural gas utilities have no control over the supply price, and they only earn a profit on the delivery they provide to customers.”
The savings due to decreases in the cost of natural gas are significant across the country. According to the Energy Information Administration, natural gas is the main heating fuel for a little more than half of U.S. homes.
The good news, though, must be tempered with the fact that natural gas costs — like all those in the energy market — are highly volatile. Supply and demand, the economy, weather and world events can affect the price from day to day.
Nationally, for example, the average annual cost of natural gas for residential customers more than doubled from 1999 to 2008.
“Right now ... the reason we’re seeing a decrease is because of what we call demand destruction due to the economy,” Fulton said. “Because of the economics out there, there’s not the demand for manufacturing.”
This makes the supply of natural gas readily available, he said. Because of the amount of traditional drilling and also Marcellus shale drilling, there are abundant supplies of natural gas at this point, and storage levels are at historic highs throughout the United States.
“That doesn’t mean that in the future we can expect this to last forever,” Fulton said. “Being a commodity, it’s subject to market.”
For instance, natural gas rates could gradually go up if it’s a cold winter.
“Things like that can impact the price of gas, but for right now there are adequate supplies to take us through the winter,” Fulton said.
The challenge is to maintain that adequate supply — last year, 23.2 trillion cubic feet of natural gas was used in the nation — so residential and commercial customers can continue to enjoy reasonable prices as the economy eventually rebounds.
Opinion
Natural gas prices down but situation remains volatile
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