Intermountain Gas PGA is a decrease for most customers
Rates for most Intermountain Gas Company customers declined slightly October 1 as a result of Intermountain Gas’ annual Purchased Gas Cost Adjustment (PGA) mechanism.
The Idaho Public Utilities Commission approved a $2.2 million decrease in Intermountain Gas’ annual revenue due to a declining demand for natural gas, ample storage and lower than normal wholesale gas prices. This is the fourth time in five years that Intermountain’s annual PGA has resulted in a decrease for most customers.
There are two major components to natural gas rates, a base rate and the PGA. Base rates cover fixed costs that rarely change. The PGA includes variable costs and is designed to more closely align actual rates with the variable portion of gas rates. The variable rates included in the PGA include: 1) the cost of purchased gas from suppliers, which is largely dependent on wholesale market prices; 2) the cost to transport natural gas and 3) the cost to store it.
With this year’s PGA, rates decline by about 1.6 percent – about 90 cents a month – for the 77 percent of Intermountain Gas customers who use natural gas for water and space hearing. Customers who use natural gas for space heating only received a 0.2 percent increase, about 9 cents a month for an average customer.
The growth in the customer class that uses natural gas for space heating only was not enough to offset the projected variable costs for this PGA year. Natural gas and electric utilities typically determine the rate each customer class pays based on the cost required to serve that class. Basing rates as closely as possible to cost of service eliminates one class of customers subsidizing another class of customers.
With the Oct. 1 adjustment, the PGA portion of gas rates drops from 49.6 cents per therm to 49.2 cents per therm. That 49.2 cents represents slightly more than half of the total customer rate. For customers who use natural gas for both space and water rating, the new total rate is 76.2 cents per therm in the winter (December-March) and 79.6 cents in the summer (April-November.) For customers who use natural for space heating only the total winter rate is 83.2 cents per therm and the total summer rate is 94.5 cents.
The yearly PGA does not impact company earnings, whether the PGA is an increase or decrease. The amount collected in the PGA variable portion of rates can be used only to meet gas supply, transportation, storage and other related expenses and cannot go to increase company earnings.
A full text of the commission’s order, along with other documents related to this case, is available on the commission’s Web site at www.puc.idaho.gov. Click on “File Room” and then on “Gas Cases” and scroll down to Case No. INT-G-10-03.