Cold spell sends city gas bills up in January
NEW ULM — The great cold streak that struck the southern states and the East Coast last month is having a chilling effect on New Ulm utility costs this month.
The January utility bills are being sent out by the New Ulm Public Utilities, and many customers are asking why the gas portion of their utility bill is much higher than usual. The New Ulm Public Utilities explains that it is simple Supply and Demand 101.
Because of the extreme cold weather across the eastern, southern and central United States from Dec. 28 to Jan. 11, the demand for natural gas for heating soared. The companies that supply natural gas to the upper Midwest were trying to find natural gas supplies for their customers and the price of natural gas went up. The day-ahead pricing for natural gas for the last three days in December traded as high as $100 per MCF (thousand cubic feet) and settled at $67.55 per MCF. The average price for the month prior to those three days was at $2.60 per MCF.
These events caused the pipeline price to spike to record-breaking levels, not seen since the polar vortex conditions that the country experienced on January 27, 2014 when prices spiked to $80 per MCF. The current gas prices were experienced throughout the upper Midwest states.
While New Ulm Public Utilities hedges much of its fuel purchases, agreeing to purchase some of the natural gas it uses at a pre-determined price, it still purchases much of its natural gas on the open market. The spike in cost is reflected in the natural gas costs on the utility bills. The average residential customer saw the price of gas rise from 64 cents per hundred cubic feet (ccf) to $1.21 per ccf.
Compounding the effect, the sub-zero temperatures locally increased the consumption of natural gas, affecting the utility bills as well.
Where does all that money go? The increase in the gas bill is a direct pass through from the supplier to the city’s customers and back to the gas supplier through the purchased gas adjustment. The New Ulm Gas department doesn’t retain any of the increased revenue.
PUC staff have been monitoring the pricing and prices are currently normal for this time of year and weather conditions. While gas pricing is currently in line, the PUC hopes for more moderate temperatures to help bring down consumption of natural gas. The weather can still change, the temperatures can drop again and the law of supply and demand may again come into play. Although this does not ease the shock of the gas bill, the PUC hopes this will help explain the issue that surrounds it.
Those who have additional gas or utility bill questions can call the Billing office at 507-359-8259. Those looking for information on energy conservation programs, please call Energy Services Representative Derek Nelson at 507-359-8228.