FAQs About Changes in ESP's Rate Structure
See also "How To Read Your ESP Bill" (PDF)
- 1. How is ESP's gas rate structured?
- 2. Why have my natural gas bills increased?
- 3. Is this happening in our area or in other areas of the country?
- 4. Can I expect to see high prices in the future?
- 5. So what is ESP doing about the higher cost of fuel?
- 6. How does natural gas compare with other energies? Should I consider converting my appliances?
- 7. You've told me it's about supply and demand, are we running out of natural gas?
- 8. Does the price of gasoline have an impact on the price of natural gas?
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1. How is ESP's gas rate structured?
The current gas rate, which went into effect with Cycle 01 billing, June 2007, is a single block system that is comprised of three parts: customer charge, fuel cost and distribution cost. You pay the same rate per unit regardless of the amount of natural gas consumed. The current components will allow adjustments to your account based on fuel cost and abnormal weather.
Customer Charge – is a fixed monthly cost to provide natural gas to your home or business. It covers the cost of billing, meter reading and equipment at the service address. This will also be your minimum bill regardless of the amount of natural gas consumed.
Fuel Cost – includes the commodity cost to purchase and transport natural gas to the City’s distribution system.
Distribution Cost – includes all other costs for operation and maintenance of the gas system, materials, equipment and facility costs.
Purchase Gas Adjustment (PGA) – is the recovery mechanism or model for the fuel costs. If fuel costs increase or decrease, then the PGA will adjust up or down. The adjustment will be passed on to the customer on his/her monthly bill. The PGA reflects the actual cost of natural gas.
Weather Normalization Adjustment (WNA) is a factor used to adjust the gas rate due to the effect of the weather. When the WNA is in effect, the customers' bills can adjust downward as a result of colder than normal periods or adjust upward as a result of warmer than normal periods. By having WNA, customers can benefit from more stable bills. The WNA reflects the weather for the current bill.
2. Why have my natural gas bills increased?
Several supply and demand factors and market conditions contributed to this increase. Greater Demand for Natural Gas: Industrial growth, spurred by a healthy economy, has increased the need for natural gas. Additionally, summer demand has increased because of gas-fired electric generating plants that produce electricity. Less Exploration and Production: Natural gas exploration and production declined in 1998 and 1999 because of low wellhead prices and this contributed to a decline in the number of rigs drilling for natural gas. However, the situation has reversed itself and more rigs have now begun drilling for natural gas than at any time during the last 15 years. Higher Energy Prices: The increase in overall fuel prices for other commodities such as crude oil, gasoline and home heating oil have also contributed to the rise in natural gas prices.
3. Is this happening in our area or in other areas of the country?
Prices are going up nationwide. The drivers of increased demand for energy and reduced inventories are happening through the natural gas industry, which impacts consumers all over the country.
4. Can I expect to see high prices in the future?
Prices are expected to moderate as new supplies from increased drilling activity come on-line. The number of active natural gas drilling rigs has been increasing in the last several months. Luckily, the decrease in hurricane activity has allowed the industry to recover from damages to oil rigs from Hurricanes Ivan and Katrina.
5. So what is ESP doing about the higher cost of fuel?
We make every attempt to purchase long-term strips of gas at competitive pricing in order to cover the basic needs of our customers. The balance of the gas is purchased on the daily market and is subject to some price volatility.
6. How does natural gas compare with other energies? Should I consider converting my appliances?
The energy marketplace as a whole is undergoing changes that affect the pricing of all energy sources (electricity, propane and fuel oil). Colder weather and growing economic and war fears have put a strain on all energy supplies. As reflected at the gasoline pumps, oil prices have remained high. Propane, as a by-product of natural gas, is also very costly now.
Natural gas is still the best energy value. It is the cleanest and most efficient fossil fuel, and it is safe and reliable. So converting your gas appliances today would be premature and ultimately more costly.
7. You've told me it's about supply and demand, are we running out of natural gas?
Ninety-seven percent of the supplies used in the United States are produced in North America, and there are abundant supplies. Many energy experts believe that the United States has several hundred years of natural gas supplies. In response to the growing demand and higher prices, active drilling rigs have steadily increased.
8. Does the price of gasoline have an impact on the price of natural gas?
Not really. The two fuels are independent of one another. Gasoline is a refined product of crude oil, and thus directly related to the price of oil, while natural gas is produced directly from underground hydrocarbon deposits, like crude oil.
Natural gas prices are dependent on the supply and demand for natural gas. In some instances, crude oil and natural gas are found in the same place and produced together. Fuel oil, like gasoline, is a refined product of crude oil and is also a substitute fuel for natural gas in some industrial facilities. In these cases, fuel oil competes with natural gas. Because oil prices are high, fuel oil does not offer much competition to natural gas and does not help to keep natural gas prices down.
