Area natural gas prices should be coming down

Customers of Pinedale Natural Gas (PNG) should see a drop in their bills coming into the summer months, due not only to the decreased usage but also to the falling price of natural gas.

“(PNG) just filed a pass to decrease their rates, as of the first of May,” said Darrel Zlomke, assistant administrator and technical supervisor for the Wyoming Public Service Commission.

The price for natural gas is in constant flux, yet companies must establish their rates twice a year, which requires them to factor both past prices and future forecasts.

When pricing was established last November, the projected cost of gas was at $7.0060 per decatherm (Dth).

The new cost is $4.1863, which is also coupled with a “commodity balancing account” (CBA) adjustment.

This adjustment takes into account the actual price of gas for the previous six months and adjusts current rates accordingly. Therefore, the price per Dth will drop an additional $0.6817 this summer, bringing the total charge to around $3.50 per Dth — nearly half of the winter rate, which had dropped to $6.55 after the CBA adjustment.

A non-gas rate of $4.16 is also added to the actual cost of natural gas, which is a charge for processing the gas that’s brought into town from the Pinedale Anticline Project Area. This brings the total charge per Dth to $7.66 this summer, as compared to $10.71 this past winter.

“They buy that cheaper gas, and that’s what rolls over to the customers,” said Zlomke. “It’s good for customers, and it’s bad for the government.”

PNG co-owner Steve Shute sees this pricing drop as a trend that will continue.

“It seems like, fundamentally, the price of gas is going to be weaker than oil for the next few years,” said Shute. “It’s cheap, and it’s going to stay cheap.”

In Texas, Louisiana, Arkansas and Pennsylvania, there have been recent discoveries of natural gas fields embedded in shale formations, and these fields have massive reserves, which should keep the market’s supply saturated.

“I’ve been doing this 30 some years,” said Shute. “And it’s a very interesting development.”

For PNG, the price of natural gas doesn’t affect the company’s finances, since it is “revenue neutral” in that area, according to Shute.

“We’re just like UPS,” he joked. “We don’t own the package — we just deliver it.”

The company makes much of its revenue from the customer charge of $15 per month, which, along with Cheyenne Light, Fuel & Power, is the second highest of the 15 gas companies that supply gas throughout the state.

“The reason we’re higher is that we’re a newer system,” explained Shute. “All of our customers in Pinedale are paying for a new system.”

It’s a distribution system that has doubled in size in the last five years alone.

In 1993, the year PNG took over the utility, it sold 42,000 Dth of gas, and by 2007, the company sold over 130,000.

Thus, as demand for gas increases, so does the need for additional distribution infrastructure, which is the reason for the monthly customer charge.

“So part of the reason we’re a little more expensive than for example Rock Springs (which has $8.70 as its customer charge) is they’ve been around since the 50’s,” said Shute. “So the big difference is we’re just a newer system.”

But overall, Shute predicts lower prices for customers for quite some time.

“Gas (price) is probably going to stay depressed,” he said. “And we’re much happier if the price of gas is lower because it makes our customers much happier.”

For the complete article see the 06-12-2009 issue.

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